Three years after its property sector started imploding, China’s government is finally doing something meaningful to fix it. It is just the start.
China has finally taken a step, albeit a relatively modest one given the scale of the problem, towards stabilising its property crisis.
They reflect, for the first time, a recognition by the central authorities that the previously piecemeal efforts to stabilise the sector by stimulating demand have failed and a more decisive – and costly – approach is required.
Property sales by floor area in the four months to the end of April were down more than 20 per cent from the same period of last year. Property investment was 9.8 per cent lower. New construction starts were almost 25 per cent lower. It doesn’t appear from the state media’s reporting of Friday’s announcements that there will be any restriction on the properties – any distinction between properties owned by state-owned or private developers – that the state-owned enterprises earmarked as buyers will be able to acquire.
In the US, something similar happened on a vastly larger scale after the 2008 financial crisis, when the Bush administration enacted the Troubled Assets Relief Program in response to the sub-prime mortgages crisis to enable the government to purchase mortgages and other toxic assets from US banks.
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