Caldwell Banker Real Estate Broker Steve Wickham carries a "For Sale" sign to place in front of a new home on August 21 in Eugene, Oregon. (Photo: China Daily) Photo Gallery>>>

    BEIJING, Sept. 29 -- Although the cooling U.S. real estate market is likely to slow the nation's economy, it will only have a minimal negative effect on China, say economists.

    The once-resilient U.S. housing market has shown signs of cooling off in recent months, raising concerns about a slowdown in the world's biggest economy.

    Existing home sales in the United States slipped 0.5 percent to an annual rate of 6.30 million units in August, down from 6.33 million in July. The figure is down 12.6 percent year-on-year, according to statistics released by the U.S. National Association of Realtors.

    The median existing home price was 225,000 U.S. dollars in August, down 1.7 percent from a year earlier the first price fall since 1995 and the second biggest decline on record.

    Existing home sales account for about 85 percent of the U.S. housing market.

    Housing construction also plunged in August, falling to the lowest level in more than three years, according to the U.S. Department of Commerce.

    Construction of new homes and apartments fell 6 percent, and the annual construction total dropped to 1.665 million units the smallest since April 2003, the department said.

    In the light of the declining home market, U.S. economic growth is likely to slow to 1.9 percent in 2007, according to UK-based bank HSBC.

    The bank previously forecast that the U.S. economy would grow 2.6 percent in 2007.

    The main reason behind the downward revision is the continued housing market slowdown, Qu Hongbin, an economist at HSBC Hong Kong, said in a recent research note.

    The marked property sector slowdown also raised growing concerns about the impact on China.

    Some economists fear the U.S. downturn will lead to a decrease in Chinese exports to the United States, a key destination for Chinese goods.

    The likely export decline, HSBC's Qu said, would cause China's gross domestic product (GDP) growth to slow.

    Sino-US trade hit 166.6 billion dollars in the first eight months of 2006, 127.3 billion dollars of which was Chinese exports.

    The bilateral trade volume amounted to 211 billion dollars last year, accounting for 15 percent of China's total foreign trade of 1.4 trillion dollars.

    Although economists agree that the U.S. housing market decline will trigger an economic slowdown as a whole, some maintain that the impact on China's economy as a whole will be insignificant.

    "A U.S. slowdown is very likely in the third and fourth quarters, but it is too early to tell if the country's economy has already entered a recession cycle," said Daniel Chan, a senior investment strategist at DBS Bank (HK).

    Chan, however, believes the impact of a U.S. property market slump on the Chinese economy will be minor.

    Han Meng, an economist at the Chinese Academy of Social Sciences, agreed.

    "The impact (of the U.S. housing sector slump) on Chinese export growth would be insignificant at least in the short and medium term as the majority of U.S.-bound Chinese exports are durable consumer goods, which are unlikely to be hit hard by the not-too-dramatic economic downturn," said Han.

    Therefore, the economist said, the negative impact on the Chinese economy as a whole would be minimal.

    "However, if the U.S. economy slides into a lasting recession, there will be some problems for China's economy," Han added.

    The Chinese economy expanded 10.9 percent in the first half of this year and accelerated to a galloping 11.3 percent in the second quarter, its fastest growth in a decade.

    Although the perceived U.S. economic downturn would put the brakes on export, one of the major engines behind China's ongoing economic boom, it should not be overblown, Standard & Poor's, a global rating house, said in a recent report.

    "If the U.S. economy slows significantly, as some expect, Chinese export growth could be hit, eliminating a still-important source of GDP expansion. But it is important not to overstate this issue, as a growing proportion of GDP growth in China now comes from domestic demand, such as consumption, investments and government spending," the report said.

    Furthermore the likely U.S. economic slowdown, some economists say, will be a boon to China in some respects.

    A drop in exports would serve as a reminder that China should further push ahead in diversifying its export destinations, an initiative that the government has already begun, said Han.

    It would also highlight the importance of relying more on domestic consumption to spur the economy, he added.

    Other economists point to different benefits from a U.S. slowdown.

    "The sluggishness of the U.S. economy might speed up the exodus of capital and China will be one of the main destinations for that capital," said Paul Tang, chief economist at Bank of East Asia in Hong Kong, although he added that the trade conflict between China and the United States may return to the spotlight as the United States could intensify its pressure on China to address its trade deficit in light of the slowdown.

    (Source: China Daily)