UBS Morning Adviser

Three years after writing about the China property bubble debate, Tao Wang and the UBS China Economics team now believe that a potential downturn in the property sector poses the biggest risk for China’s economy in the next few years. A drop in Chinese construction activity could have far-reaching effects, with a sharp downturn in construction volume (10% decrease) estimated to result in a 2.5% reduction in Chinese GDP. To be clear, UBS Economics’ base case is that the property downturn will be manageable and GDP growth in 2015 will slow modestly to 6.8%; a sharp downturn scenario is estimated to be a 15% probability event.