China announced some of its strongest moves yet to revive its debt-stricken property sector on Friday, allowing local governments to intervene to buy real estate and easing mortgage rules as it seeks to boost a recovery in the world’s second-largest economy.
China’s ailing property market has been at the heart of concerns over the economy, with an overhang of unfinished projects sapping consumer confidence and undermining local government finances.
Beijing gave the green light to authorities to buy some residential projects and turn them into public housing to help put a floor under falling prices. They will also be able to purchase land from struggling developers.
Analysts have long called for the government to buy idle housing stock to help restore confidence among consumers burnt by years of declining prices.
China’s central bank, meanwhile, relaxed property lending requirements, lowering the minimum down payment for first-time homebuyers from 20 per cent to 15 per cent.
The People’s Bank of China (PBoC) said it would also scrap minimum interest rates on mortgages, allowing provinces to “independently determine the minimum commercial individual housing loans for first and second homes in each city under their jurisdiction”.
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Vice-premier He Lifeng on Friday said: “In cities with a high inventory of commercial housing, the government may need to consider purchasing some ... at reasonable prices to be used as affordable housing.”
The Hang Seng Mainland Properties index in Hong Kong was up 5.3 per cent against a rise of 0.9 per cent for the benchmark Hang Seng index after the announcement.
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The measures came after China’s National Bureau of Statistics (NBS) released figures showing further declines in the housing market in April, which analysts said was weighing on consumer sentiment and slowing China’s economic recovery.
“The downward spiral in the property sector worsened in April, with property investment and new home sales showing larger contractions, while housing price declines steepened,” Nomura said in a report on the NBS data.
The NBS said property prices in so-called first-tier cities fell by 2.5 per cent year on year in April.
China’s economy has shown mixed signs of a recovery in recent months, with exports returning to growth in April and some consumption indicators recovering but real estate remaining subdued.
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Industrial production grew 6.7 per cent year on year in April, the NBS said, beating a forecast of 5.5 per cent from economists polled by Bloomberg and 4.5 per cent growth in March.
However, retail sales grew only 2.3 per cent from a year earlier, falling far short of an analysts’ forecast of 3.7 per cent and declining from 3.1 per cent growth in March.
“China’s economic report card for April showed that unevenness persisted. Industrial production outperformed ... while domestic retail sales growth slowed, in part due to base effects,” HSBC said. “More policy support is needed to support the economy.”
The government is stepping up fiscal stimulus efforts, with the People’s Bank of China selling Rmb1tn ($140bn) of ultra-long bonds on Friday. In advance of the sale, a government adviser said the bonds aimed to “give full play to the crucial role of government investment in shoring up economic growth”.
Chinese policymakers have increasingly relied on investment in industry to offset lagging growth in other sectors and take pressure off the ailing property market and deeply indebted local governments. High-tech industrial manufacturing was one bright spot in the April data release, expanding 11.3 per cent on a year earlier.
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But the industrial policy is feeding trade tensions with the US and the EU, China’s most important export markets, which have accused Beijing of pursuing unfair trade practices by stoking overcapacity and dumping excess low-cost goods on its markets.
Car production soared 16.3 per cent in April from a year earlier, but sales declined 5.6 per cent, data which “may add fuel to the fire” of charges of Chinese overcapacity, said Lynn Song, chief economist for greater China at ING. He added that consumption growth was “likely to remain moderate” this year “as consumer confidence remains downbeat”.
Fixed-asset investment, meanwhile, grew 4.2 per cent year on year in the January-April period, trailing a Bloomberg analysts’ poll forecast of 4.6 per cent growth and a 4.5 per cent increase in January-March. – Copyright The Financial Times Limited 2024
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