While urban home prices in China have fallen for nine months, the full impact of the correction has yet to hit the broader economy and will probably cause a lot more pain when it does. Property investment increased more than 10 percent last year to Rmb9.5 trillion ($1.5 trillion), according to the National Bureau of Statistics, compared with an 8 percent fall in sales as measured by gross floor area.
Property sales in major cities in the week before the Chinese new year holiday, which officially began on February 18, fell by about 20 percent from the corresponding week a year earlier.
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Power production and sales of cars and consumer items such as fridges and washing machines also fell from the same period last year in the run-up to the country's most important national holiday, according to a report from Haitong Securities, the Chinese brokerage.
With consumer price inflation expected to come in at less than 1 percent in February, after an increase of just 0.8 percent in January, a growing number of analysts are calling for Beijing to cut interest rates again to boost growth. "The time is now ripe for another cut in the interest rate," Haitong said.
In November China cut benchmark interest rates for the first time in more than two years in the face of the country's weakest annual growth in nearly a quarter of a century.
Already indebted local governments rely heavily on land sales for revenue. According to the latest estimate from China's national auditor, local government debts stood at Rmb18 trillion as of June 2013.
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Since then only one provincial government has revealed updated debt figures. Hainan said that local debt had increased by more than 20 percent in the 18 months to last December, reaching Rmb170 billion, according to Caixin magazine. This included Rmb145 billion in direct debts, with guarantees or contingent liabilities accounting for the remainder.
The rest of China's 30 provinces are supposed to report updated debt figures to the finance ministry by March 8. The ministry wants to rein in local government borrowing through special purpose financing vehicles and instead raise funds by selling bonds.
Despite their financial squeeze, provincial governments have pledged to increase fixed asset investment this year to bolster growth. Hunan, Hubei and Shaanxi provinces recently revealed plans to invest a combined Rmb6 billion in infrastructure and other fixed assets in 2015, a 20 percent increase over last year.