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May 17, 2024

China’s New Measures to Address Property Crisis and Stimulate Economic Growth

China is poised to announce new strategies to tackle its ongoing property crisis and stimulate economic growth. Despite a notable 6.7% increase in factory output over the past year, housing prices have seen a significant decline in the first four months of 2024, according to data released on Friday. The National Bureau of Statistics acknowledged the need for increased domestic demand, both from consumers and businesses, as the country grapples with a 9.8% drop in housing prices from January to April compared to the previous year.

Liu Aihua, spokesperson for the bureau, emphasized the importance of aligning with the Communist Party leadership’s policies. She stressed the necessity of balancing supply and demand, meeting public expectations for high-quality housing, and developing a new model for the real estate sector’s high-quality development. In response to these challenges, the State Council, China’s Cabinet, announced plans to hold a news conference later on Friday to address the property industry’s issues.

The Chinese housing market has been in decline since a government crackdown on excessive borrowing by property developers several years ago. This has affected a wide range of businesses and slowed growth in the world’s second-largest economy. Many developers, responsible for constructing numerous high-rise apartments that have reshaped China’s urban landscapes, have defaulted on their debts. To counter this, the government has reduced interest rates and released billions of dollars in financing to assist financially struggling developers in completing housing projects already sold and paid for.

Additionally, some local governments have begun purchasing unsold apartments due to weak demand, intending to rent them out as affordable housing. These initiatives, currently trial programs, could potentially be implemented nationwide. According to the financial news outlet Caixin, the housing ministry, central bank, other government agencies, and state-owned banks are forming a joint task force to devise ways to revitalize the industry.

China’s economy grew at a robust rate of 5.3% in the first quarter of this year. However, this growth rate is relatively modest for a developing economy, and signs of economic weakness persist. The recent report by the National Bureau of Statistics indicated that while factory output increased by 6.7% in April from the previous year, and investment in fixed assets like factory equipment rose by 4.2%, other sectors struggled. Housing starts fell by nearly 25% year-on-year, and sales, measured by floor area, dropped by 20%. Financing for property projects also fell by 25%, and retail sales saw only a 2.3% increase in April.

Despite these challenges, officials remain optimistic about a rebound in demand. The government is implementing policies to encourage households to replace old cars and appliances with new ones, aiming to boost consumer spending.

The announcement of new measures to address the property crisis and spur economic growth is expected to provide a much-needed boost to the struggling housing market. By focusing on balancing supply and demand and promoting high-quality development in the real estate sector, the Chinese government hopes to stabilize the housing market and support broader economic growth. As these measures take effect, there is cautious optimism that China can overcome its current challenges and achieve sustained economic progress.

Jhumpa Lahiri

Jhumpa Lahiri

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