The housing and construction sector has long accounted for more than a quarter of the gross domestic product in the world’s second largest economy. It has grown rapidly over two decades.
However, since 2020, it has suffered from the authorities’ tightening of conditions for real estate contractors to obtain loans, which has pushed giant groups in this sector to the brink of bankruptcy.
At the same time, housing prices fell significantly.
The authorities are still counting on growth of “about 5 percent” this year, but analysts consider this goal very optimistic due to the many obstacles facing the second largest economy in the world.
Housing Minister Ni Hong said during a press conference that Beijing “will increase the loan scale for projects on the white list to four thousand billion” yuan ($562 billion) by the end of 2024, according to an Agence France-Presse report.
This is almost double the previous figure (about 2.23 trillion yuan).
The white list system, which was announced at the beginning of the year, is a mechanism through which municipalities recommend to banks real estate projects that should be given priority in financing.
“One million dilapidated homes in urban towns will be renovated,” Ni Hong added.
“There are a lot of safety risks and unsuitable living conditions in urban towns. People want modernization,” he explained.
50 million families
Chinese leaders, including President Xi Jinping, last month acknowledged new “problems” in the world’s second-largest economy.
The authorities then revealed a package of recovery measures that are considered the most important in several years.
The measures included reductions in Interest ratesespecially for existing mortgages, as well as easing restrictions on purchasing housing.
The authorities said in the press conference held on Thursday that interest rates on existing real estate loans “will decrease on average by about 0.5 points.”
Deputy Governor of the Chinese Central Bank, Tao Ling, estimated that the measure “will benefit 50 million families and 150 million residents.”
Stimulating demand for housing is one of the authorities’ priorities to ensure a sustainable recovery.
In this regard, many major Chinese cities such as Beijing, Shanghai (east), Chengdu (southwest) and Tianjin (north) have eased their restrictions on purchasing real estate in recent weeks.
China is scheduled to publish quarterly growth figures for the July-September period on Friday. It is expected to be the weakest of the year.
“Not excited”
Stock markets lost in Hong Kong And Shanghai about 1 percent on Thursday, with shares of real estate companies declining.
But Stephen Innes, an analyst at EBI Asset Management, said in a note that during the press conference, Chinese officials tried to “speak without saying anything, focusing more on the stability of the real estate sector.”
He stressed that “as we progress… we see that the markets are not really enthusiastic” about these announcements.
“Let’s be honest: the turmoil prevailing in China’s real estate sector cannot be solved with a few rhetoric and weak measures,” Innes added.
This view is shared by Heron Lim, an analyst at Moody’s Analytics.
Lim believes that the measures announced Thursday are “stabilization policies, not growth policies.”
“So… we don’t see Chinese residential property prices recovering significantly over the next two years,” he adds.
A group of experts who spoke to Agence France-Presse expects annual growth of 4.9 percent for the year 2024, a rate that remains within the range set by the government but will be one of the weakest rates in recent years.
