China released a real estate stimulus plan a day before the GDP announcement… The market is again ‘disappointed’

Whitelist loan volume expanded to 4 trillion yuan
Renovation of 1 million underdeveloped houses in big cities
Showing willingness to stimulate stimulus ahead of 3rd quarter growth rate announcement
I was expecting a ‘big bang’ stimulus package.
Stock prices and iron ore prices plummeted simultaneously.

A day before the announcement of the third quarter gross domestic product (GDP) growth rate, the Chinese government announced real estate measures such as expanding the supply of loans from the white list (list of blue chip companies). However, some say that the real estate stimulus package does not meet market expectations.

According to Bloomberg News on the 17th, China’s Minister of Housing, Urban and Rural Construction, Ni Hong, said at a press conference held at the State Council News Office on this day, “To revive the sluggish real estate market, we will increase 4 trillion yuan (approximately 767 trillion won) in loans for whitelist projects within the year. They announced that they would increase the number and expand the local government’s urban village redevelopment projects.

The whitelist project is part of a top-down plan introduced by authorities to ensure that unfinished homes are delivered to buyers and prevent another widespread mortgage boycott. According to Nomura Holdings, about 3 trillion yuan of direct financial support from the central government is needed to supply China’s estimated 48 million unsold homes.

China will nearly double the amount of whitelist loans that support real estate companies in financial difficulties within this year. Xiao Yuanqi, deputy director of the State Financial Regulatory Administration of China, who attended the press conference with Director Ni, said, “As of the previous day, the number of whitelisted project loans already approved nationwide was 2.23 trillion yuan.” This means that an additional loan of 1.77 trillion yuan will be provided by the end of the year.

Additionally, China plans to remodel 1 million old houses in large cities. This measure, although smaller than the 2016-2018 initiative, follows several years of government efforts to renovate shantytowns.

In addition, Chinese authorities announced that they would place 4.5 million young people and those new to society into guaranteed housing (affordable housing for the vulnerable) by the end of the year. In addition, we are considering whether to allow banks to provide loans for the purchase of idle land and expand support for affordable housing for families with two or more children.

These measures came one day before the announcement of China’s third quarter GDP growth rate on the 18th. China has set this year’s GDP growth target at around 5% and has been rolling out economic stimulus measures one after another since the end of last month to achieve this.

▲Ni Hong, Minister of Housing, Urban and Rural Construction of China, is holding a press conference announcing a new real estate market stimulus plan in Beijing on the 17th. Beijing/Reuters Yonhap News

Bloomberg pointed out that the announced measures suggest that authorities are putting pressure on banks and local governments to provide more funds to the real estate market. However, this disappointed economists who called for active intervention by the central government and the People’s Bank of Korea.

The market also reacted coldly due to the lack of new and bold measures. The stock index of a Chinese real estate development company listed on the Hong Kong Stock Exchange plunged more than 8% during the day. In the commodity market, iron ore and steel futures prices also fell.

“The authorities’ measures are helpful, but the market may have expected a big bang stimulus package to stabilize the real estate market in the short term,” said Xiaojia Ji, an economist at Credit Agricol in Hong Kong. “Considering what was announced, the scale of relief is still not large,” he said. “We may remain skeptical about the short-term impact,” he analyzed.