Third stimulus plan following reserve ratio cut
Prescription for real estate revitalization, including renovation of 1 million homes
Mayor Seon: “Disappointed by the lack of direct government support”
The Chinese government announced on the 18th that it would provide additional bank loans of 1.77 trillion yuan (about 340 trillion won) within this year to blue-chip real estate companies (whitelisted) that are experiencing financial difficulties. In a situation where it is predicted that China will have difficulty achieving the original target of ‘5% GDP growth rate’ due to the economic downturn, another prescription to revive the economy was proposed. China is actively trying to stimulate the economy by lowering the reserve requirement ratio on the 24th of last month and announcing plans to early deploy infrastructure-related budget and expand government bond issuance on the 8th of this month.
Ni Hong, Minister of Housing, Urban and Rural Construction, said at a press conference that day, “We will increase the size of loans (PF) for projects subject to the whitelist to 4 trillion yuan by the end of the year.” China selected a whitelist in the real estate sector in November last year and delivered it to each bank. In addition, banks were instructed to provide active financial support, including credit loans, to companies included in the list. As of the 16th, the approved whitelist loan amount was 2.23 trillion yuan, which means an additional 1.77 trillion yuan will be invested for the remainder of this year.
Director Ni also announced, “We will renovate 1 million underdeveloped areas and old (risky) houses in the city.” The Chinese government explains that it plans to first build 1 million units, focusing on 35 large cities, and that the scale can be further expanded in the future. However, it was not disclosed how much money will be invested in renovating old houses. In addition, it was decided to increase the supply of guaranteed housing for low-income and young people, allowing 4.5 million new people to move in by the end of this year.
Regarding the real estate market, Manager Ni said, “In early October, real estate markets in major cities across the country showed signs of recovery, with the correction over the past three years bottoming out and starting to rise.” However, analysis suggests that this measure is also far from the government’s direct financial investment expected by the market. Bloomberg News reported on this day, “Investors are disappointed with measures to require banks and local governments, rather than the central government, to provide more funds to the real estate market.”
China’s economic outlook remains negative. Chinese economic media Caixin predicted China’s third quarter (July-September) GDP growth rate to be announced on the 18th at 4.4%. Bloomberg News predicted it to be 4.5%. This is lower than the 4.7% in the second quarter of this year (April to June) and is the lowest quarterly rate this year.
Beijing = Correspondent Kim Cheol-joong tnf@donga.com
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