Fitch sees mainland economy paying high price if property bubble bursts

The bursting of China's property bubble would wipe 1 per cent off mainland economic growth and cause serious problems for the nation's banks, the ratings agency Fitch said yesterday.

"[Property] is our biggest macro concern in China. The fact there is such an overhang of supply … if the market were to collapse it would affect the economy and in turn banks," Jonathan Cornish, Fitch's head of north Asia banks, said at the agency's global banking conference in Hong Kong.

He estimated that a property market downturn would take about 1 per cent off mainland gross domestic product growth rates.

"Clearly if the property market were to slow down very sharply … [that] would have significant implications in terms of potential credit cost," he said.

Analysts were apprehensive about an oversupplied property market in China.

A report from Nomura in March said there was 370 square feet of residential floor space created for each new urban resident in China last year.