In a recent interview, analysts have expressed skepticism over China’s official announcement of a “stability package” aimed at the real estate market, labeling it as merely a “new bottle for old wine.” They believe that the strategy primarily relies on delaying tactics to prevent a financial crisis, while failing to address the severe oversupply issues plaguing the housing sector.
On October 17, China’s Ministry of Housing and Urban-Rural Development, along with four other departments, unveiled this so-called stability package. Analysts from U.S. media outlets argue that the measures outlined are essentially just a rebranding of existing policies, which do not tackle the core problems of the housing market. Investors reacted negatively when the stock market opened high but quickly plunged, particularly in real estate stocks, with many expressing disappointment in the government’s ability to rejuvenate the market.
A report by Voice of America highlighted this disappointment, noting that the Shanghai Composite Index, during the announcement of the measures, initially rose but later fell, dropping below 3,200 points in the afternoon. The Hang Seng Index also closed down by 207 points, or 1.02%. Many investors felt that the new policies fell short of market expectations.
Wang Guo, an assistant researcher at the Chung-Hua Institution for Economic Research in Taipei, noted that while the official package appears multifaceted, it largely consists of previously implemented policies that miss the critical issues. He pointed out that the biggest problems in China’s real estate market include numerous unfinished buildings and excess inventory, mainly caused by developers going bankrupt and funding shortages. However, the projects that qualify for the government’s “white list” tend to be those with stable funding and sufficient collateral, meaning that the new measures do little to resolve the crisis of unfinished buildings.
Additionally, the Ministry of Finance indicated during the meeting that local governments would be authorized to use special bonds to address the issue of excess inventory. However, many local governments are already strapped for cash, making it unrealistic to expect them to issue more debt to tackle this problem.
Wang also commented on the so-called “four cancellations,” referencing previous discussions around similar measures from late September. He remarked that these steps have not improved the housing market, and the aim to construct 1 million units in urban villages and renovate dilapidated housing is misguided.
Xu Zhen, vice chairman of the Institute for Future Cities at the Chinese University of Hong Kong, echoed these sentiments, stating that China’s real estate issues are unlikely to be resolved in the short to medium term due to the significant debts faced by central and local governments as well as developers. He cautioned against the unrealistic approach of increasing liquidity through massive borrowing, advocating instead for a more rational strategy aimed at achieving a soft landing for housing prices and maintaining market stability. Otherwise, persistent debt accumulation in an attempt to “find a turning point” and “boost housing prices” could lead to even more severe consequences.
The “stability package” has also drawn ridicule from netizens, with many mocking the policies as a means for the public to subsidize capitalists’ debt repayment. Comments such as “Is China’s economy doomed without property speculation?” and criticism of the new policies for exacerbating social inequality have surfaced widely on social media platforms.
