Potential homebuyers look at a property model in Huai’an, Jiangsu province.Photo:Xinhua
China does not have structural shortcomings that will trigger a subprime mortgage crisis like the one that occurred in the US in 2007, as the country’s urban and rural housing demand continues to rise amid regulatory measures to prevent and address the risks of the real estate market, a former chief of the People’s Bank of China (PBC) said on Sunday.
Dai Xianglong, former governor of the PBC, the central bank, made the remarks after a deceleration in the growth of housing prices, with a large number of vacant commercial properties in some cities affected by the indebted Evergrande, which has been described by some foreign media outlets as “China’s Lehman Brothers moment” that could have a negative effect on the world’s second-biggest economy.
Speaking at a financial forum, Dai said that China has long taken measures to prevent and resolve the risks of the real estate market.
The former PBC chief noted that the central bank announced plans to reduce the reserve requirement ratio of commercial banks aimed at increasing market liquidity, after the Political Bureau of the Communist Party of China Central Committee held a meeting on December 6, proposing to “promote the construction of subsidized housing and support the commercial housing market to better meet the needs of homebuyers”.
At the same forum on Sunday, many analysts also noted that any short-term risks faced by individual housing enterprises will not affect the normal medium- and long-term financing function of the market.
Three major Chinese financial regulators, including the PBC, moved to reassure the markets that the Evergrande issue is an individual case and should not be a concern for the country’s capital market and housing market.
Moreover, during the tone-setting Central Economic Work Conference that concluded on Friday, top policymakers called for efforts to explore new models for the industry such as the development of a long-term rental market, while reiterating that “houses are for living, not for speculating.”
The decision will effectively control and reduce the risks of the property sector and promote a virtuous circle and the sound development of the sector, according to the meeting.
“The model of relying on rising house and land prices to make a profit will change with the further implementation of the real estate tax, which will not only reverse the wrong ideas of housing investment and speculation for profit, but also help the concept of housing consumption gain a foothold,” Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Sunday.
Yan noted that the meeting put forward the concept of forward guidance, indicating that authorities will take new actions based on the current expectation.
China will continue to promote land supply and deepen the rectification of behavior that may cause unstable expectations, including speculation on housing prices, according to Yan.
Global Times
