China’s massive property market is crumbling. Xi Jinping wants to revive socialist ideas about housing and put the state back in charge.
Under the new strategy, the Communist Party would take over a larger share of the market, which for years has been dominated by the private sector. Underpinning it are two major programs, according to policy advisers involved in the discussions and recent government announcements.
One involves the state buying up distressed private-market projects and converting them into homes that the government would rent out or, in some cases, sell. The other calls for the state itself to build more subsidized housing for low- and middle-income families.
The goal, the policy advisers say, is to increase the share of housing built by the state for low-cost rental or sale under restricted conditions to at least 30% of China’s housing stock, from 5% or so today.
Beijing’s economic mandarins, led by Xi’s top economic-policy aide, Vice Premier He Lifeng, are still hammering out how to execute the real-estate strategy. Economists caution that the plan could take years to achieve—if it’s achievable at all.
The cost would be huge: potentially up to $280 billion a year for the next five years, or a total of around $1.4 trillion, according to some analysts.
Whether China wants to pay that tab—or even can—is a central question. Local governments in China are already burdened with colossal debt, and it’s unclear whether Beijing will be willing to bear the brunt of the funding burden.
Beijing has repeatedly disappointed analysts and investors over the past couple of years with insufficient or poorly executed measures to stimulate growth and clean up the housing mess. People who have examined some of the government’s plans say the strategy is also filled with complexities and contradictory aims that could make it difficult to fully implement successfully.
Interesting to see what really will be done. China has millions of people paying mortgages on housing units that are not finished and probably will never be finished. Yet those buyers got the loans which they must pay back to banks controlled by the CCP. They are indebt for the next 25-30 years with no assets to live in or to sell. What is Xi going to do. Add in the many units that are tofu dregs, falling apart in front of their owners eyes, with no fix in sight. That's just the tip of the iceberg.
@JudicialMiaRepublican4mos4MO
The units you refer to are prime candidates for this programs.
Watch.
@L1b3rtyBaboonLibertarian4mos4MO
Even in the U.S. you never own property. Pay off your mortgage then don't pay your real estate taxed for a few years. You will find out who really owns your property.
@SoulfulBi11R1ghtsSocialist4mos4MO
American-style capitalism has - for ninety years - included bank supervision where excessive lending could cause bank management to be replaced by the government. I worked for a bank in the early 1980s where the Reagan Administration did exactly this.
Intense bank examination of loan underwriting quality and internal quality control has kept the American economy out of Great Depressions. FDIC loan portfolio quality review is similar to FDA quality audits of pharmaceutical companies. They are frequent. And rigorous. It’s the beginning AND end of controlling systemic risk.
Unfortunately,… Read more
@InnocentKoalaGreen4mos4MO
Unfortunately, you are 100% correct.
