For the current situation of China's real estate, John's point of view is desirable, "China's property market is in the midst of a slow-moving crisis."
What deserves attention is the "three red lines" policy introduced in 2020. The policy had twin goals: lessening the economy's over-reliance on property and tamping down on speculation that had put house prices out of reach for many middle-class Chinese. China Evergrande's default crisis may have served as a warning.
 |
| The Evergrande Center building in Shanghai. (Hector Retamal/AFP/Getty Images) |
Like Japan, China's housing bubble is partly the result of financial liberalization. One striking feature was that when the bubble burst, Japan responded too slowly and piecemeal. Alicia pointed that the key difference
between the cases is that China was able to maintain a much higher economic
growth rate than Japan as air started to come out of its bubble, giving Beijing
greater margin for error.
China's decision to keep lending prime rate unchanged disappoints: economists
What can government do?
· First, the government could revamp demand
for property.
· In addition, the government could
accelerate social housing development, using financing sources such as pension
funds.
· Third, the government could consider
isolating households from property development volatility. Banks would be
encouraged to provide mortgages only to buyers with such insurance.
· Incentives for banks to carry out proper
due diligence can be reinforced.
· Fifth, the government could speed up the
development of alternative investment products for long term savings.
· Sixth, the government could revamp the
fiscal system to make local governments less reliant on property development
for their revenues.
All these proposals underline how the
Chinese authorities have tools to resolve the property crisis. Depending on how
they use them, the result could bring much needed relief to the sector as well
as structural improvements for the entire Chinese economy.
Comments
Post a Comment