A long-running residential building boom is petering out, with the effects seen from slumping steel and cement prices, to electricity use, rail traffic and retail sales.
The drag will be long-lasting with home completions set to fall by 1 to 3 percent annually from next year to 2025 after almost tripling in 13 years, according to Beijing-based research company Gavekal Dragonomics. A once-in-a-generation shift in demand for housing and an overhang of supply suggest that the government can only cushion the effect with interest rate cuts such as the one announced Nov 21, not reverse it.
"The turning point has come," said Wang Tao, chief China economist at UBS Group AG in Hong Kong. "Construction has to come down so that means growth has to slow, and therefore steel demand, cement demand, energy consumption, mining production, appliances, automobiles－everything has to come down."
The challenge for Premier Li Keqiang is that services and consumption are not picking up the slack quickly enough, leaving China set for its weakest full-year expansion since 1990. Increasing evidence the slowdown is structural, not cyclical, is playing out on commodity markets and leaves the United States shouldering prospects for a pickup in 2015 global growth.
Bloomberg's monthly GDP tracker shows China's growth slowed to 6.91 percent in October from a year earlier, the third straight month below 7 percent and the weakest stretch since the start of 2009.
Most of the tracker's seven gauges－industrial production, electricity production, passenger traffic, railway freight volume, investment, retail sales and exports－are either slowing or falling.
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A long-running residential building boom is petering out, with the effects seen from slumping steel and cement prices, to electricity use, rail traffic and retail sales.
