China pledges to improve property policy in the troubled economic recovery

China’s top leaders pledged to “timely adjust and improve policies” for the beleaguered real estate sector, taking stable employment to a strategic goal, among other pledges to boost domestic consumption demand and solve domestic debt risks.

The Communist Party’s highest decision-making body, headed by President Xi Jinping, said it would implement a “counter-cyclical” policy and largely adhere to prudent monetary policy and proactive fiscal policy, according to the Read Published Monday evening a quarterly meeting of the Politburo.

The July Politburo meeting usually sets the tone for China’s economic policies for the second half of the year, as market watchers eagerly await stronger guidance on policy support for faltering growth in the world’s second-largest economy.

“Currently, the economy is facing new difficulties and challenges, mainly due to insufficient domestic demand, difficulties in operating some enterprises, many hidden risks and dangers in key areas, and the bleak and complex external environment,” Xinhua said. Quoted from the Politburo According to him.

She added that the economic recovery after the epidemic will proceed in a “wave-like” manner in a “roundabout” process.

A batch of disappointing economic data last week spurred renewed calls for policy support to boost growth.

Official data last week showed that China’s GDP in the second quarter grew by 6.3% from a year ago, registering 0.8% growth compared to the first quarter – which was significantly slower than the 2.2% qoq pace recorded in January-March.

“While it signaled more support for the economy, the Politburo meeting generally failed to deliver broad-based stimulus,” Barclays economists said in a note late Monday.

They added: “We view this as a signal that the government will anchor growth around its target but refrain from a massive policy response, given the intended shift by senior leaders in focusing on ‘quality’ growth.”

Observers pointed out that the Political Bureau dropped the phrase “housing for living and not speculation” from its formulation related to the real estate sector in the country.

In its place, the Politburo is now talking about adapting to “major changes” in the supply and demand dynamics of the real estate market, with city-specific measures to better meet basic housing demand and their needs for better housing. She also vowed to “activate all kinds of disruptive properties”.

The country’s real estate sector is struggling to get out of a credit crunch after the government suppressed its debt levels in August 2020.

Years of explosive growth led to the building of ghost towns as supply outpaced demand, as developers looked to capitalize on the appetite for homeownership and real estate investment.

By some accounts, the country’s real estate sector still accounts for up to a quarter of China’s annual economic activity.

The Politburo said on Monday that it is necessary to effectively prevent and solve domestic debt risks, and formulate and implement a package of debt reduction plans. He also deems it “necessary” to strengthen financial supervision and the steady reform of high-risk small and medium-sized financial institutions.

“We consider the July Politburo meeting statement to be slightly more pessimistic than expected, mainly reflected in the neutral statement of the current economic situation, deletion of ‘housing to live in, not to speculate’ and recognition of new developments in the real estate market,” Goldman Sachs economists wrote in a note late Monday.

They added, “As the July Politburo meeting will set the tone for policy stance in the second half of this year, we believe that a new assessment of the economic situation, real estate market and local government debt will imply more policy easing measures in the next few months.”

China’s leaders pledged to “actively expand domestic demand” and “expand consumption by raising income levels.”

This is generally in line with an earlier statement by the National Development and Reform Commission.”restore and expand“Consumption is in a wide-ranging plan to boost growth that includes increasing household income, improving the business environment for private firms, and stabilizing youth employment.

The Politburo also echoed previous plans to increase consumption in automobiles, electronic products, consumer goods and household services.

China’s leaders pledged to ramp up government investment, but declined to provide details. It also aims to speed up the issuance and use of local government-private bonds.

“Those hoping for a new stimulus approach that includes larger household transfers will likely be disappointed,” Julian Evans-Pritchard, head of China economics at Capital Economics, said in a note Monday.

“The readings indicate an increase in consumption, but only indirectly by supporting the family’s income,” he added.

“We understand this to mean that rather than providing aid to families, policy efforts should focus primarily on supporting employment, a goal that has now been raised to a ‘strategic high level’.”