Housing sector seen returning on steady track amid nation's urbanization

Visitors learn about China's new energy vehicles during the 135th session of the China Import and Export Fair in Guangzhou, Guangdong province on April 15, 2024. [Photo/Xinhua]

Chinese scholars visiting Tokyo shared their views on the current state and future trajectory of China's economy, refuting claims from some countries that it has peaked and is facing "overcapacity".

During a lecture held by the Chinese embassy in Japan on Wednesday, Chen Weidong, director of the Research Institute of Bank of China, told the audience that based on the current situation, there is still significant growth potential in China's real estate market.

Currently, the per capita housing area in China is 25 square meters. As urbanization progresses and the average housing area per person expands — alongside rigid housing demand from fresh college graduates each year — it is estimated that China will need around 1 billion square meters of new housing annually until 2035, Chen said.

Overall, China's real estate market is seeking a new balance between supply and demand, aiming to maintain stable demand while ensuring housing prices do not experience significant volatility, he added.

Regarding remarks on China's so-called industrial overcapacity, Chen said capacity utilization should be viewed in a global market context rather than limited to a single country.

In 2023, the capacity utilization rate was approximately 79 percent for the European Union, 78 percent for Canada, 77 percent for the United States and 76 percent for China. Over the long term, China's capacity utilization rate has remained at a stable and reasonable level, he said.

Some countries are claiming that China's new energy vehicle industry is facing "overcapacity". Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics, said that from the perspective of the global green transition, NEVs are still in their early stages and there remains significant market potential.

Currently, the global NEV fleet is around 30 million vehicles, with 20 million of these on Chinese roads. However, the total number of vehicles worldwide is 1.45 billion. The share of NEVs is very small. Even converting half of the existing gasoline vehicles to NEVs could take many years, Tu said.

The global penetration rate of NEVs, meaning the proportion of NEVs in new car sales, is only 15.7 percent, indicating significant growth potential, he added.

"The rapid development of China's NEV industry in recent years has raised some concerns, which essentially boil down to discomfort with new competition. This is understandable, but it's important to view the development of this emerging industry with a long-term perspective as it presents numerous possibilities," Tu said.

He said that although Chinese NEV companies do have relatively good first-mover advantages, having a first-mover advantage does not mean they will always lead, nor does it mean that latecomers will never have a chance.

"Thus, some countries are overreacting by adopting trade protection measures against China's leading position in the NEV field. Moreover, from the perspective of global climate change mitigation and achieving a green transition, the development of China's NEV industry should be encouraged, not feared," he said.

He further explained that the government does not pick specific companies to support directly with subsidies for NEVs. Instead, subsidies are given to consumers, allowing them to choose the products they prefer.

Moreover, China has significantly opened up market access in the NEV field, allowing many new car manufacturers to enter this sector, including private and foreign companies, rather than reserving market opportunities for State-owned enterprises, Tu said.

Over the past 40 years, China's economic growth has been heavily driven by two key factor inputs — capital and labor. In the future, China's economy is likely to be driven more by total factor productivity, or TFP, growth, said Liu Qiao, dean of the Guanghua School of Management at Peking University, who believes that it is possible for China to maintain a TFP growth rate above 2 percent.

Liu highlighted the importance of sustaining a certain level of investment and investing in key future sectors, such as new infrastructure and strategic emerging industries.

In his opinion, key future areas include technological innovation. This involves creating a high-level circulation of technology, finance and industry, where financial support fuels technological advancements, driving industrial innovation.