Beijing's 'historic' bailout
China will be hoping its announcement of a major package to support the struggling housing sector marks the beginning of the end of its property crisis. But is it big enough?
Three years deep into its seemingly interminable real estate crisis, China has unleashed what it describes as a historic spending and policy package to boost demand and arrest falling prices. Many in the market have been quick to write off the intervention as being if not too late, then certainly too little.
There are legitimate questions to be asked about why it’s taken so long, and indeed the lack of policy urgency to date has only exacerbated the deterioration in both developers’ cash flow and broader market confidence. But there’s little doubt the penny has finally dropped.
The support package unveiled Friday includes, among other measures, a 300 billion yuan ($63 billion) central bank injection to fund state companies instructed to help buy up housing stock that has been constructed but remains unsold. That figure, economists say, falls well short of what is required to address the problem, with potential buyers waiting on the sidelines expecting prices to plummet further.
Goldman Sachs analysts said it would “require significantly more funding than available thus far” for the measures to prove a game-changer. ANZ, meanwhile, said China’s property rescue plan leaves things “fundamentally unchanged”, pointing out that demand, in particular, looked decidedly uncertain.
