China’s housing rescue package offers the best path for putting the country on track to expand around 5 per cent, 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.
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 programme to provide 300 billion yuan ($42.5 billion) of central bank funding to help government-backed firms buy unsold homes from developers.
Among the policy options considered by 15 analysts, 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.
Designed to reduce the inventory glut, it’s 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.
Without a stimulus blitz, the Chinese economy is expected to expand 4.8 per cent this year in real terms, according to the median forecast of economists in the survey, falling roughly at the lower end of the government’s target range. But nominal growth, which factors in the impact of declining prices, will likely come far lower at 4.25 per cent, they estimate.
Measures other than housing support will likely prove less effective in giving the economy a push, the survey showed. Meanwhile, China’s property gloom is projected to last another two to five years by eight economists in the survey.
