The Asian Development Bank (ADB) has cut China’s economic growth forecast this year in concerns of its zero-Covid policy and stringent lockdown measures that also impacted its fragile property sector.
The bank expected China’s gross domestic product (GDP) in 2022 at 4%, a sharp plunge from its earlier forecast of 5% growth as the country continued to adhere a zero-covid strategy in response to renewed outbreaks early in 2022 that triggered the reimposition of strict lockdowns.
ADB added that an unstabilized housing market also contributed to an economic slowdown in the country as average new home prices in 70 major cities fell by 0.8% year on year in May despite a 15 basis-point cut in the 5-year loan prime rate and a reduction in the mortgage-rate floor for first-home buyers.
China has been facing problems with homebuyers requesting for a halt on mortgage payment due to delay in construction of their pre-paid apartment. Chinese are required to pay mortgage to developers for an under construction property, which will be used to finance construction by the developers.
The Evergrand crisis has shaken the property sector as several companies found themselves in the same state as Evergrand and missed debt repayment. Without pre-paid funds from homebuyers, developers do not have enough funds to finance its project.