China’s latest real estate crackdown shows confidence in export-led recovery, economist says



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China’s intensified efforts to curb the real estate sector, traditionally a mainstay of economic growth, has been driven primarily by the government’s view that stronger-than-expected exports may instead fuel the post-pandemic recovery, a said a senior economist.

Added to Beijing’s firm stance in this move is its desire to become less dependent on foreign sources of high-tech products, which will require devoting more resources to this sector rather than the real estate industry, Lu said. Ting, an economist at Nomura Holdings Inc., said Wednesday at an online conference.

The real estate sector was a major engine of growth when the Chinese economy was not doing well, Lu said. But this time the government has curbed the inflow of excessive financial resources into the real estate sector, both on the demand side. than supply, instead of deploying stimulus policies.

Exports continue to soar in May, up 23.4% in dollars from the same period in 2019 before the pandemic, fueled by strong global demand as more economies around the world open up.

The rapid growth of Chinese exports gives the government more scope to promote sustainable and stable development without over-stimulating the real estate and infrastructure sectors, Lu said.

Many large cities have imposed administrative restrictions on the purchase of housing, such as tighten on speculation in the school district housing market (å­¦ 区 房). Meanwhile, regulators have put in place increasingly tighter controls on borrowing from large developers, known as “three red lines”(三条 红线) political, and also capped bank loans the real estate sector, including consumer mortgages.

The policies aim to reduce indebtedness in the heavily leveraged real estate sector that could pose a risk to financial stability, and to narrow the wealth gap to ensure long-term social stability, Lu said.

Nonetheless, Lu also warned that downward pressure in the real estate sector could dampen economic growth in the second half of 2021 and next year.

The American brokerage firm Morgan Stanley recently downgraded its outlook on the Chinese real estate sector citing the risks that policymakers will take additional steps to calm the overheated market and provide further incentives for developers to reduce their debt.

The government’s efforts to stimulate domestic development and production of high-tech products such as chips and core software and reduce dependence on imports amid mounting economic tensions with the United States add a Added impetus to the government’s move away from a real estate-driven recovery, Lu said.

This requires a shift to an economic model that supports these industries, rather than the real estate sector, by injecting more resources such as credit, Lu said.

China has sworn almost double spending on Basic search (link in Chinese) to around 280 billion yuan ($ 43.2 billion) over the next five years to achieve major breakthroughs in basic technologies and improve the country’s science and technology capabilities.

Read more
Developers face new debt limits as real estate crackdown continues

Contact reporter Luo Meihan ([email protected])

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