China | Real estate and unemployment, the dark clouds of the economy

(Tianjin) Deserted streets and half-empty residential towers as far as the eye can see: in Tianjin in northern China, the real estate crisis has given rise to almost ghostly neighborhoods against a backdrop of unemployment in the world’s second largest economy.

A year and a half after the lifting of health restrictions which penalized activity, the real estate market is an obstacle to recovery.

This sector has long represented a quarter of Chinese GDP in the broad sense and served as a driving force in many other areas.

It is now moribund while the economy is slowing down, resulting in unfinished housing and distrust of many developers on the verge of bankruptcy.

Like many Chinese, Wang Dongmei and her daughter bought a home in 2016. Their property, located near a riverside pedestrian path, was worth 870,000 yuan ($165,000) at the time.

It has since lost more than 30% of its value, explains this retiree met by AFP in Tianjin, a large port city located 30 minutes by train from Beijing.

“We want to sell it,” sighs M^me Wang, disillusioned to see that market prices are “at their lowest in 10 years”.

Failing real estate

Purchasing property has long been seen by the Chinese as a safe investment.

The real estate crisis has called everything into question and the fall in prices per square meter is a hard blow for household wallets.

Since last year, China has stepped up measures to try to revive its real estate sector.

In May, it also reduced the minimum contribution for first-time buyers and proposed the repurchase of unoccupied housing by local authorities. With mixed results.

A jump in the market seems to be taking shape, according to Zhao Xin, a real estate agent in Tianjin, who is advising potential buyers in a residential complex still under construction.

But “to say that we will find the same level” of sales as before the crisis “is not realistic”, he believes, given the desire of those in power to deflate a bubble which has exploded the debt of number of private developers.

Some are now fighting for their survival, like Evergrande whose setbacks regularly make the headlines.

Depressed job market

The price of new housing is expected to fall further this year by 15 to 20%, warns the Fitch rating agency.

The economy will feature prominently in the Communist Party’s discussions in July during an important meeting during which measures for real estate are expected, according to many analysts.

Youth employment will also be a central theme, predicts Harry Murphy Cruise, economist for Moody’s Analytics.

President Xi Jinping called in May to make youth unemployment the “top priority.”

The rate reached record highs last year, before the authorities suspended the publication of the figures, officially to review their methodology.

Private sector under pressure

A certain gloom was perceptible in Shanghai during a recent job fair.

“The job market is depressed,” laments Wu Jiawen, 25, who graduated in December and is “worried” about still not having found a job.

This month, 11.8 million students will leave college and add to the competition.

China’s employment problem goes much deeper.

Dynamic sectors, such as the Internet which has developed at great speed due to lack of strict regulation, are now more supervised.

Result: significant employment pools are shrinking against a backdrop of declining profitability, including digital giants Alibaba, Tencent and ByteDance.

Sluggish growth

Even the finance sector is not immune to this trend, although salaries there are lower than 10 years ago, according to a former banker named Wang, who does not wish to give his full identity for fear of reprisals. .

For their part, exports come up against geopolitical tensions between Beijing and Washington and the desire of certain countries to diversify their production chain.

This sector is historically an important lever of growth for China and its performance has a direct impact on employment for thousands of companies.

“We will probably have to go through a recession” before bouncing back, says Guan, boss of a company that manufactures plastic, pessimistically.

The Chinese government is targeting around 5% growth this year.

This rate would make many countries dream, but for China it remains a long way from the meteoric expansion that has propelled it to the top of the world economy in recent decades.