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Economy

China's housing market pulling down growth

BEIJING -- China's slowing industrial production is a symptom of stagnant housing sales.

     Although the government is toeing the "economy is stable" line, the encroaching uncertainty could trigger calls for more economic stimulus.

     On Saturday, government figures showed August growth in China's industrial production slowing to 6.9% year on year, sharply down from 9% in July and the slowest growth since the global financial crisis of 2008.

     Tempers are on edge. Earlier this month, home buyers railed against a property developer in Chongqing that recently slashed condominium prices from 10,000 yuan ($1,629) per square meter to around 8,000 yuan to 7,000 yuan. Those who got angry had bought before the price cut.

     The early condo buyers are now demanding that they be reimbursed the difference.

     Similar outbursts are taking place across China.

     With the market heading down, developers have little choice but to cut the prices of new condos as they scavenge for sales. New home prices are declining in about 90% of major cities.

     There are other signs that China's economy is losing steam. Property investment is lackluster. And prices remain weak. China's steel price index fell to 89 (1994 = 100) in early September, according to CEIC, a company that analyzes Chinese economic data. The index has been on the wane since topping 100 in mid-November 2013.

     The wholesale price index, meanwhile, fell year-on-year for the 30th straight month in August, with the decline expanding for the first time in five months.

     As the housing market sputters and prices fall, companies are slashing production.

     To prop up the economy, the government is allocating more money to railway and other infrastructure projects, and the central bank is trying to push money to smaller companies.

     Few analysts see a tailspin coming; growth is actually expected to come above 7% this year. But with overseas economies lacking solid underpinnings, China's economy will rely on government policies for the time being.

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