China's property market is beginning a "collapse" that will hit the nation's banking system, says a former chief economist of the International Monetary Fund.
As China's economy develops, "especially at the speed it's growing, it's going to have bumps," said Kenneth Rogoff.
He said that while recoveries across the global
economy were "very slow," the danger of a return to recession was not elevated.
Rogoff's concern echoes that of investors, who sent China's benchmark stock index to its worst loss in more than a year last week.
China's data has been a focus because the nation has led the global recovery from the worst postwar recession.
Chinese authorities have this year been trying to cool the economy as it expanded at an 11.9 per cent annual pace in the first quarter, and to reduce property-market speculation.
The central bank has told lenders to set aside more money as reserves, and targeted a 22 per cent cut in credit growth at banks this year, to 7.5 trillion yuan ($1.6 trillion).
The efforts have contributed to a slump in real-estate sales, while prices continue to climb. The value of property sales dropped 25 per cent in May from the previous month.
- BLOOMBERG
