MNI: China Could See Slow Growth To Keep Hse Mkt Regs: Ex-Offl

     BEIJING (MNI) - China should keep current stringent regulations on the

housing market, even if it comes at the cost of sacrificing some short-term

economic growth, a former official at the People's Bank of China(PBOC) said in

an emailed note Friday.

     If the current regulations are maintained, the construction industry would

likely contribute less to the GDP growth, also lowering local governments' land

sales revenue, said Sheng Songcheng, now an advisor to the Shanghai municipal

government.

     The real estate sector contributed 6.5% to GDP growth in 2017, although

Sheng believed that contribution was underestimated. Property investment alone

accounted for 5.8% of the growth, according to Sheng.

     --MODERATE DECLINE OK

     But he also believes a moderate decline in home prices won't have a great

impact on overall growth.

     And by increasing housing supply, including rental houses, to meet the

demand, home sales and real estate investment will be upheld at a stable level,

Sheng said.

     China's authorities have cracked down on housing speculation this year,

imposing a series of the strictest housing policies seen in a few years. Home

price rises have been curbed or declined slightly, leading to a cool down in the

entire chain from sales to the land market, Sheng said.

This is a significant outcome, Sheng said, adding it is necessary to continue to

rein in the industry. Sheng noted that the government tend to relax housing

regulations during economic downturns, then tighten the control when home prices

soar

     With markets having pared their overall bullish expectations towards the

home prices, Sheng urged that -- at this critical point -- the government should

not ease current regulations, as it will undermine the change in outlook.

     Sheng warned that high home prices remain an outstanding issue, and could

bring greater risks if they continue to rise. The price-to-income ratio of core

Chinese cities are above 20, some have exceeded 30, not only far exceeding the

international standard, but are now several times higher than that in the U.S.

and Japan before their housing bubbles burst (Japan: 10-12, U.S.: 4-5).

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MGQ$$$]