Economists Urge China to Ramp Up Housing Rescue to Propel Growth
(Bloomberg) -- China’s housing rescue package offers the best path for putting the country on track to expand around 5%, in the view of most economists, assuming it’s deployed to maximum effect in the face of a real estate crisis expected to last as long as five more years.
Most Read from Bloomberg
-
Belfast’s Grand Central Station Creates New Era for Northern Ireland’s Public Transport
-
New York City’s Transit System Plans $65.4 Billion of Upgrades for Grand Central, Subways
Among the policy options considered by 15 analysts in a Bloomberg survey, a more forceful implementation of the government-led plan was the top choice of a majority of respondents. The poll followed the release of data for August that deepened doubts over whether the economy will meet Beijing’s annual growth goal.
“A complete change in mindset is required to break the deflationary spiral,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “A massive easing is needed to avoid a contractionary nominal GDP.”
The years-long real estate slump that’s wiped out an estimated $18 trillion in wealth from households has been the single biggest challenge faced by the Chinese economy. It’s cost millions of jobs, ravaged consumer confidence and brought down demand for products like steel.
Yet four months after China unveiled its most far-reaching attempt to revive the property market, progress has been slow on plans that include a program to provide 300 billion yuan ($42.5 billion) of central bank funding to help government-backed firms buy unsold homes from developers. Unemployment has worsened in the meantime, with the youth jobless rate rising for the second straight month in August to its highest level this year.
Designed to reduce the inventory glut, the package of measures is far short of the 1 trillion to 5 trillion yuan that some analysts said was needed to deliver a more decisive fix. And given the unattractive economics of the plan for local authorities, only 29 cities are heeding the call to help absorb an excess of housing, a fraction of more than 200 urged to participate by the central government.
China has dismissed as risky and overly expensive a proposal — with a price tag of almost $1 trillion — made by the International Monetary Fund to use central government funds to complete unfinished housing on a large scale.
Authorities have been unwilling to extend more support to the housing sector, in part, because of Beijing’s resolve to shift the economy’s growth driver away from property to technology and manufacturing. The government has urged banks to lend to developers and stalled housing projects, while stopping short of providing direct funding.