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113

China pledges $42 billion in a slew of measures to support the struggling property sector (www.cnbc.com)

submitted 6 months ago* (last edited 6 months ago) by [email protected] to c/[email protected]

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These and other measures announced Friday marked Beijing's latest efforts to address issues in the massive real estate sector.

The People's Bank of China will provide 300 billion yuan ($42.25 billion) to financial institutions to lend to local state-owned enterprises (SOEs) so they can buy unsold apartments that have already been built.

Also Friday, the PBOC removed a floor on mortgage interest rates, and lowered the minimum down payment ratio for first- and second-time home buyers.

BEIJING — Chinese authorities on Friday pledged new support for state-owned enterprises to enable them to buy unsold apartments, in an effort that could help developers get more funding to finish construction on pre-sold properties.

These and other measures announced Friday marked Beijing's latest efforts to address issues in the massive real estate sector.

"I think it is encouraging that the policy is taking a turn of direction trying to support the housing market," said Zhu Ning, a professor of finance at Tsinghua University and author of the book "China's Guaranteed Bubble."

People's Bank of China Deputy Governor Tao Ling told reporters at a briefing Friday the central bank would provide 300 billion yuan ($42.25 billion) to financial institutions to lend to local state-owned enterprises (SOEs) so they can buy unsold apartments that have already been built.

The central bank expects the support to release 500 billion yuan in financing for such purchases, which the SOEs could turn into affordable housing.

The real estate companies can then use funds earned from those sales to complete construction on other apartments, the central bank said.

As for unfinished, pre-sold properties, the National Financial Regulatory Administration Deputy Director Xiao Yuanqi told reporters that commercial banks have provided 935 billion yuan in loans to finish construction on whitelisted projects since the program was released in January.

"The government's purchase of housing inventory can inject more liquidity to developers, who could then have more resources for housing delivery," Larry Hu, chief economist at Macquarie, told CNBC. "Finally the government stepped in as the buyer of the last resort."

"At this stage, it's mainly SOEs and local governments to implement the policies, but their resources may be too limited to move the needle at the macro level," he said. "Later on, we might see more efforts from the central government."

Developers "that must go bankrupt should go bankrupt, while those that need to be restructured should be restructured," Dong Jianguo, deputy head of the ministry of Housing and Urban-Rural Development, told reporters in Mandarin, translated by CNBC. He said homebuyers' interests and rights should be prioritized, and those that violate the law should be punished.

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[–] [email protected] 83 points 6 months ago* (last edited 6 months ago) (1 children)

Wow a government spending billions to provide affordable housing instead of bombing civilians CommiePOGGERS

[–] [email protected] 48 points 6 months ago (1 children)

It is incredible to think that so many western countries could just chop their military spending in half and spend the spare on affordable housing.

[–] [email protected] 46 points 6 months ago

Yeah or like a dozen other productive and helpful things for the people they are supposed to govern

[–] [email protected] 81 points 6 months ago (1 children)

Meanwhile in amerikkka : Biden pledges $69420 trillion weapons package to Israel

[–] [email protected] 4 points 6 months ago (5 children)

How is this... relevant to this article... at all?

[–] [email protected] 74 points 6 months ago* (last edited 6 months ago)

Because liberals won't realise that this is the difference between China and America unless communists spell it out for them, and the US is committing a real genocide.

[–] [email protected] 56 points 6 months ago (1 children)

whataboutism

[–] [email protected] 43 points 6 months ago

soypoint-1 whataboutism soypoint-2

[–] [email protected] 45 points 6 months ago

Because China spends billions to put people into homes, America spends billions destroying homes and killing people you stupid fuck

[–] [email protected] 42 points 6 months ago

It’s actually directly related! Check out this article

[–] [email protected] 25 points 6 months ago (6 children)

Highlighting differences in the way that two completely different forms of structuring society and noting how one leads to better outcomes for people might make a poignant suggestion towards USians about what we could have if we didn't lick the boot of corporations

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[–] [email protected] 65 points 6 months ago (1 children)

can china take over the world already negative

[–] [email protected] 58 points 6 months ago

Libs be like "China is imperialist!!!" god I wish lea-tired

[–] [email protected] 50 points 6 months ago (2 children)

Wow sweetie you're not supposed to use government money to help people, no wonder why China is failing.

[–] [email protected] 21 points 6 months ago

If we help people who need it, it wouldn't be fair to the people who don't need help. smuglord

[–] [email protected] 35 points 6 months ago

[–] [email protected] 28 points 6 months ago (1 children)

Lmao that article title makes it seem like they're bailing out the corps. Scumbag journalism

[–] [email protected] 19 points 6 months ago* (last edited 6 months ago) (2 children)

The official 70-city house price index released Friday fell more quickly in April than in March, according to Goldman Sachs analysis that looks at a seasonally adjusted, annualized weighted average.

The figures indicated an 8.5% month-over-month decline in April, steeper than 5.6% in March, Goldman said.

So this is mostly to keep the prices from falling too fast, which could cause some chaos and pain. They also mention that there is 2 years worth of supply waiting to be sold, but also 20 million apartments that were pre-sold but not completed.

So sounds like they are using govt intervention to buy up inventory on the cheap (slowing falling prices) and selling that at a fair price to folks that have their money tied up in these failing developers projects.

Buying up the inventory also provides stabilization of developers that are not complete failures and just struggling under the falling prices and lack of demand. This seems like Keynesianism done from a socialist perspective essentially.

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[–] [email protected] 16 points 6 months ago* (last edited 6 months ago) (2 children)

People’s Bank of China Deputy Governor Tao Ling told reporters at a briefing Friday the central bank would provide 300 billion yuan ($42.25 billion) to financial institutions to lend to local state-owned enterprises (SOEs) so they can buy unsold apartments that have already been built.

The bankers are bailing out the real estate companies. I'm not clear on why anyone is praising this as some socialist paradise behavior, it's not like the SOEs are going to turn around and give the housing to the people for free. This is exactly the same kind of behavior as happens in Western/capitalist nations, where the government pushes the banks to extend loans to major companies that are struggling financially.

The government’s purchase of housing inventory can inject more liquidity to developers, who could then have more resources for housing delivery,” Larry Hu, chief economist at Macquarie, told CNBC.

"inject more liquidity to developers" e.g. transfer of government (social) wealth to property owners. Privatize the gains and socialize the losses.

“Finally the government stepped in as the buyer of the last resort.”

Because the property prices are too high for average people to afford, and more than the properties are actually worth.

[–] [email protected] 28 points 6 months ago* (last edited 6 months ago) (1 children)

Yeah you could call it state capitalism or a bailout, the end result is more affordable housing. I’d rather bailout housing speculators than market speculators.

Also Friday, the PBOC removed a floor on mortgage interest rates, and lowered the minimum down payment ratio for first- and second-time home buyers.

Developers "that must go bankrupt should go bankrupt, while those that need to be restructured should be restructured," Dong Jianguo, deputy head of the ministry of Housing and Urban-Rural Development, told reporters in Mandarin, translated by CNBC. He said homebuyers' interests and rights should be prioritized, and those that violate the law should be punished.

[–] [email protected] 10 points 6 months ago (2 children)

Yeah you could call it state capitalism or a bailout,

I don't know if it is "capitalism" per se, but it is the same kind of behavior as seen in capitalist countries. It is 100% a bailout.

the end result is more affordable housing.

Is it? based on what? the only financial impact of this is, again, to transfer social wealth to property owners.

the PBOC removed a floor on mortgage interest rates, and lowered the minimum down payment ratio for first- and second-time home buyers.

Great, they lowered the barrier-to-entry for getting into debt. They haven't lowered the inflated prices on the housing.

[–] [email protected] 23 points 6 months ago* (last edited 6 months ago) (1 children)

It is 100% a bailout.

It's not a bailout if it's a loan. It's a loan.

[–] [email protected] 8 points 6 months ago (1 children)

To be clear, PBOC is lending money to SOEs (the central government financial institution is lending money to local government entities). The SOEs are then purchasing assets from the real estate companies.

The government is lending money to itself (loan). The government is then giving that money to the property owners (bailout).

[–] [email protected] 26 points 6 months ago* (last edited 6 months ago) (6 children)

It is not "giving" that money to the property owners. It is exchanging that money for property. It is not free money.

[–] [email protected] 11 points 6 months ago (2 children)

You don’t actually believe what you wrote, right? Because back in 2008, the US bought 60% of GM’s stock and over a trillion in mortgage backed securities (the bad debts that destroyed the bank’s books). Yet, this was clearly a bailout, despite the fact that the US received property in exchange for its cash.

[–] [email protected] 19 points 6 months ago (1 children)

The difference here is that the bad ones are going to be allowed to go bankrupt. The ones that are fine will be bought.

[–] [email protected] 8 points 6 months ago (1 children)

Apologies, I’m not sure I’m following your point here. Please correct me if I’m misinterpreting you (which is definitely possible). Are you saying “the government purchasing inventory from a business (for the purpose of helping that business/industry) that is struggling to sell that inventory is only a bailout if that business would have gone bankrupt but for the government’s purchase. If that business would have survived, then it is not a bailout.”?

[–] [email protected] 6 points 6 months ago

No. I'm saying that some of these properties will sell perfectly fine and aren't bad properties but they won't sell soon enough for the companies currently holding them. Other properties are genuinely bad and will not sell and the companies that built them should rightfully be cast into the sea.

The good properties are essentially just being shifted from the companies about to go bust to the SOEs which can wait for as long as it takes to sell them. While the companies that currently own these good properties can not wait that long.

[–] [email protected] 12 points 6 months ago (1 children)

The state is not buying stocks, or securities here, but physically existing real estate and turning it into a state owned good, not one owned by a private landlord

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[–] [email protected] 9 points 6 months ago (1 children)

By allowing developers to build more housing, they increase the supply of housing. Increased supply necessarily lowers cost.

[–] [email protected] 5 points 6 months ago* (last edited 6 months ago) (13 children)

But there are already a lot of unsold housing units. That is the asset that the SOEs are purchasing from the real estate companies.

The issue isn't supply, it's that the prices of the existing supply are too high for people to buy - because real estate has been used as a wealth growth vehicle in China exactly the same as in the US.

We've already tried this in the US - giving money to developers to increase the supply of housing. It hasn't worked here, I'm not sure why it would work there unless the government actually caps the price of new units in order to force the construction of affordable housing.

Without additional regulation, this action is a wealth transfer, and nothing more.

[–] [email protected] 10 points 6 months ago* (last edited 6 months ago)

Prices are falling for 2+ years now but they are very careful about it being gradual and controled. De-marketizing some housing stock (paying bellow market rates per unit mind you) by absorbing them into affordable state owned public housing initiatives will also relieve inventory while facilitating demand. Increasing the share of public housing is an obvious way to control prices and kneecap speculation potential in the sector going forward. The built housing is already there so making it public is an obvious step. The barriers and regulations against speculation ,overbuilding and corruption going forward for these private entities are a whole different thing and China has been pretty strict recently during this controled deflation of the sector

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[–] [email protected] 6 points 6 months ago (1 children)

The government’s purchase of housing inventory can inject more liquidity to developers, who could then have more resources for housing delivery,” Larry Hu, chief economist at Macquarie, told CNBC

Except that real estate is one of the few things that is very finite. If all the best places to build have already been developed (cheap, accessible, desirable) then it will cost the developers more and more to try to develop less accessible or desirable places. Any that try will find that their ability to make a profit will be greatly reduced and it would have been more "profitable" for the developer to just take the money from the state owned enterprises and retire.

[–] [email protected] 5 points 6 months ago* (last edited 6 months ago) (3 children)

Any that try will find that their ability to make a profit will be greatly reduced and it would have been more “profitable” for the developer to just take the money from the state owned enterprises and retire.

Yes... and well, let's extend a sort of best-case into the future:

the SOEs purchase unsold housing from real estate companies
the SOEs then offer those units for sale to buyers at reduced prices
the real estate companies spend the money from the SOEs to develop new properties
the completed new properties are put on the market... where they are now competing against the units that were previously sold to the SOEs

This is bad. Either the developers have to build low-value units which they expect to be able to sell at lower cost than whatever the SOE will be selling units for, or they have to build high-value units which they expect they will be able to sell to wealthier clients who don't want the units that the SOEs are selling.

If the former, then they will undercut the SOEs' ability to sell the units they purchase, leaving the government holding bad assets. If the latter, then there will be no additional affordable housing built.

So I think you're right, it would make sense for a lot of the developers to simply take the money from the SOEs and then leave the market.

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[–] [email protected] 14 points 6 months ago (1 children)

Title really made it seem like they bailed out the real estate companies 💀

[–] [email protected] 11 points 6 months ago

It's CNBC, it was intentional

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