China Takes Action to Address Property Crisis Amid Economic Woes

China Takes Action to Address Property Crisis Amid Economic Woes

ByAudInsights.blog

China’s Response to the Property Crisis

China is finally taking action to address the three-year property crisis that has been weighing on its COVID-scarred economy. In an effort to boost financing for property developers, Beijing is urging banks to offer unsecured short-term loans to a select group of developers on a designated ‘white list’. If approved, these measures will be the largest undertaken by Beijing to address the $3.2 trillion funding gap needed to complete approximately 20 million incomplete pre-sold units across China.

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The Impact of the Property Crisis

China’s real estate sector has been in crisis since the second half of 2021 when major developer Evergrande faced a liquidity crisis. This prompted other real estate developers to default on their bond payments, fueling fears that the crisis could have a spillover effect on other sectors in China and globally.

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The Challenges Faced by Beijing

While Beijing has been trying to cool speculation in the property market, it is now faced with the challenge of reviving the sector to boost the economy. The real estate market, along with related industries, contributes as much as 30% to China’s GDP. However, consumer demand for real estate remains low due to economic uncertainty and falling property valuations.

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Beijing’s Response

According to Rory Green, the chief China economist at GlobalData TSLombard, Chinese officials are finally showing signs of panic and have implemented aggressive and unusual stimulus measures. The ‘white list’ for property developers is one such measure. However, experts like Vishnu Varathan, the head of Asia economics and strategy at Mizuho Bank, believe that the ‘white list’ may fall short of solving the property crisis as banks may still have concerns about lending to struggling developers.

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Source: Beijing is making its biggest move yet to patch up the property crisis threatening to blow up China’s economy

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