MNI INTERVIEW2: China Developers Need More Help To Consolidate
MNI (BEIJING) - China needs additional official support for its property market to consolidate a recent stabilisation in home sales, including faster moves to restructure real-estate developers to avoid large-scale defaults, a senior policy advisor told MNI.
While property prices have perhaps fallen enough, there is no room for complacency and authorities should expand financing channels for developers in order to accelerate industry consolidation and promote the restructuring of some developers, said Zhang Bin, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.
The restructuring requires not only the efforts of local governments and the company itself, but also the support of the central government,Zhang, also a delegate to the National Committee of the CPPCC, the country’s top advisory body, said in an interview.
Expectations of official support have jumped since last week’s Government Work Report called for efforts to “effectively prevent the risk of debt default of real estate enterprises” as the stability of the property and stock markets was added to the central bank’s mandate for the first time. (See MNI: PBOC To Buoy Assets, As Stocks, Property Added To Mandate)
PROPERTY SUPPORT
Authorities still have room to lift restrictions on home purchases and sales, Zhang said, noting that mortgage rates were likely to fall again as interest rates are reduced under the People’s Bank of China’s moderately loose monetary policy stance. A restructured property developing sector should also be subject to updated standards for construction and housing layouts, Zhang said.
Still, the recent stabilisation in second-hand house prices should continue, he said. Average prices across 100 cities fell 0.42% month-on-month in February, a marginal slowing from January’s 0.51% pace of decline and the seventh consecutive month of improvement, China Index Academy data shows. (See MNI: China Tier-one Housing Markets Likely To Stabilise)
While supporting China’s consumption took precedence in the Government Work Report, Zhang said that boosting investment remains necessary. Investment is strongly correlated with consumer demand, he noted, and added that, aside from infrastructure investment, there is significant potential for public investment in the services sector and public welfare, including education and healthcare.
Zhang also noted low levels of inflation would provide ample room for additional fiscal and monetary stimulus.