Dec. 28 – Asia is leading the recovery of the global economy, but the overheated Chinese property market is drawing concern.
“The reason that I’m worried about that is not just property prices are getting high, but we’re seeing industrial companies actually speculating the land, which is not healthy,” said Dong Tao, chief Asia economist of Credit Suisse, in an interview with CNN.
“We have seen this in Japan in the 1980’s. I certainly hope that China is not going to repeat the mistakes that Japan made 20-30 years ago,” said Tao. “China is the first economy to get out of recession, so I think it’s natural to see the Chinese Central bank to be probably the first central bank among major economies to tighten (its monetary policy).”
China adjusted home ownership transfer taxes last Tuesday in an attempt to reign in speculation in the property market. The move meant that individuals transferring the ownership of their non-common houses which have been purchased for less than five years shall pay the full amount of business tax.
Asia was the least hurt and recovered the fastest from the global financial crisis in large part due to measures taken after the Asian Financial Crisis of 1997. In addition, the high savings rates of Asian consumers helped to quicken the recovery in the region.
While recovery is expected to remain strong in the coming months, questions remain whether it is sustainable over the long haul. “Ultimately, we need to see the consumer in the U.S. and Europe become stronger and that’s probably years away,” Tao told CNN.