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'China not facing US-style housing crunch danger'

Posted on May 13 2014 | IANS

Washington, May 13 : Housing market slowdown may weigh on China's growth but China's is not in danger of a US- style housing crunch if sales and demand continue to fall, a US expert said Monday.

"Certainly there are signs of cooling down. Sales are down, investment is still going fairly strongly, but it will follow off if sales continue to be relatively weak," said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics.

Lardy said continued drop in property investment and demand of housing could pose big risks to China's growth because much of Chinese economy is housing-related.

However, he noted, the leverage associated with investment in China's housing market is fairly modest, and the household debt as a share of GDP, though has gone up quite a bit, is still relatively low.

"If prices soften for a while, you are not going to find a large number of borrowers under water immediately, and trying to liquidate their ownership of property," said Lardy.

The situation in China is going to play out quite differently from those in the advanced economies where housing market is also a concern, Lardy added.

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