Fitch Cuts China Growth Forecasts Due To Turmoil In Property Mart

Ratings agency Fitch has cut its growth forecast for China's economy this year citing a slowdown in the country's colossal property sector, which is also facing headwinds over faltering real estate giant Evergrande.

Photo Insert: The slowdown in the country's colossal property sector and the Evergrande fiasco, were contributing factors to the growth forecast cut.

China enjoyed a swift economic rebound from the COVID-19 pandemic, but strict new rules on the country's developers have caused a deleveraging rush and helped push housing giant Evergrande to crisis point, Agence France-Presse (AFP) reported.

Financial markets have tumbled over fears that the Chinese group could collapse, leading to possible contagion in the world's second-biggest economy and beyond.

Fitch Ratings said it expected growth to come in at 8.1 percent this year, compared with a previous 8.4 percent estimate, saying the "main factor weighing on the outlook is the slowdown in the property sector".

Weakness in the property market comes after a recent bout of regulatory tightening by authorities looking to rein in surging prices and companies' excessive borrowing. Beijing has cracked down on developers in a bid to force them to offload debt, introducing its "three red lines" to curb leverage last year.

"Housing starts are falling and financial pressures are weighing on real-estate investment," Fitch said in its latest report. “Residential investment directly accounts for around 10 percent of GDP and property activity has large spill-overs to other industries," it added.

The property slowdown is also expected to hit emerging markets, taking a toll on global commodity demand.

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic