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JLL reaction to China 2013 GDP figures, out today

​​​​​​​​​​20​​​​​​​​​​​​​​​ Jan ​2014

​JLL reaction to China 2​013 GDP figures, out today


Official figures out today show China’s economic growth slowed in the final quarter of 2013, leaving year-on-year growth at its lowest level since 1999. But it’s still the world’s best growth story, say JLL experts.


​​​​​​​​​​​GDP growth in the world’s second largest economy was 7.7 percent in 2013, as quarterly growth slowed during the final quarter of last year. This full-year figure is slightly ahead of market expectations and also exceeds the Chinese government target of 7.5 percent.

For China experts like Michael Klibaner, JLL’s Head of Research for Greater China, the slowing momentum comes as scant surprise and does little to dent confidence in the Chinese growth story:

“Expectations are lower going forward, which is rational – our clients are certainly adjusting their expectations. But future years of credit-driven growth at eight percent would not be good news.

​​"And we mustn’t forget the bigger picture here. At it’s current size 7.5 percent growth in China today adds the same amount in real terms to the world economy as 12 to 13 percent expansion would have done five or six years ago. China is still the world’s best growth story."​

2013 saw the lowest growth of fixed-asset investments in China for a decade, but real estate transaction volumes were up 71 percent on 2012 according to JLL data released last week. At US$ 25.1 billion by year-end China was the second largest real estate investment market in Asia behind Japan. Buoyant asset values were in stark contrast to a stagnant leasing market as Klibaner explains.

“In the first half of 2013 everyone was obsessed with whether we’d get a hard-landing from the government’s structural economic reform package. This manifested in delayed decision making among companies about expansion and hiring, which impacted demand for office space and saw rents flat or falling in tier 1 and tier 2 cities.

“In the second half of the year however enquiries picked up. Demand for retail space also remains strong, which combined with the e-commerce boom, has lead to huge interest in logistics real estate.”

Slower GDP growth is largely the result of weaker industrial output and sales of Chinese exports missed an official growth target of eight percent in 2013. But Kilbaner anticipates change in 2014.

“We’re optimistic that exports will be stronger in 2014 off the back of growth in the US, the EU coming out of recession and Japanese expansion. The government will use that positive contribution to slow growth in other parts of economy, to control credit expansion. So by this time next year we’ll be looking at 7.3 to 7.5 percent GDP growth for 2014.”

“The Chinese economy is the key determinant of Asian economies and therefore of real estate markets,” says Alastair Hughes, JLL CEO for Asia Pacific.

“Looking ahead to 2014 we expect a period of stabilisation. Chinese real estate transactions bounced back last year after a period of caution while investors waited to see if fears over a hard-landing and political instability would materialise. Neither did, and we anticipate continued strong growth in Chinese real estate. The fundamentals are just so strong and China offers solid investment options.

If you want to take reasonable emerging market risk you can buy a good quality investment in Shanghai. It’s an international-style market and is reasonable transparent. Longer-term if you want to ride the growth in online retailing you could buy a logistics unit on the outskirts of Beijing. The China story is undoubtedly still worth buying into.” ​​​