One of the main drags on the world’s second-largest economy has been the downturn in the country’s property market, which began three years ago.
Aside from policies aimed at boosting stocks, the recently unveiled stimulus package also targeted the real estate industry.
It includes measures to increase bank lending, mortgage rate cuts and lower minimum down payments for second-home buyers.
But there is scepticism that such moves are enough to shore up the housing market.
“Those measures are welcome but unlikely to shift the needle much in isolation,” said Harry Murphy Cruise, an economist at Moody’s Analytics.
“China’s weakness stems from a crisis of confidence, not one of credit; firms and families don’t want to borrow, regardless of how cheap it is to do so.”
At the Politburo session, China’s top leaders vowed to go beyond interest rate cuts and tap government funds to boost economic growth.
However, other than setting priorities like stabilising the property market, supporting consumption and boosting employment, the officials offered little in the way of details about the size and scope of government spending.
“Should the fiscal stimulus fall short of market expectations, investors could be disappointed,” warned Qian Wang, chief economist for the Asia Pacific region at Vanguard.
“In addition, cyclical policy stimulus does not fix the structural problems,” Ms Wang noted, suggesting that without deeper reforms the challenges China’s economy faces will not go away.
Economists see tackling entrenched issues in the real estate market as key to fixing the broader economy.
Property is the biggest investment most families will make and falling house prices have helped to undermine consumer confidence.
“Ensuring the delivery of pre-sold but unfinished homes would be key,” said a note from Sophie Altermatt, an economist with Julius Baer.
“In order to increase domestic consumption on a sustainable basis, fiscal support for household incomes needs to go beyond one-off transfers and rather come through improved pension and social security systems.”
Credit: Source link
