Chinese leader Xi Jinping said in his speech at the G-20 summit that “everyone is having a hard time,” indirectly admitting that China’s economy is facing challenges. He personally took the opportunity to try to attract foreign investment.
Earlier, the People’s Bank of China and the China Banking and Insurance Regulatory Commission issued a document on November 14 to introduce 16 measures to stabilize the housing market. Some media described it as an effort to rescue the property sector.
The 16 rescue measures include encouraging financial institutions and property developers to negotiate independently.
For example, if development loans and trust loans expire within the next six months, the borrowers can be given a one-year extension. And at the same time, all localities are encouraged to reduce the down payment ratio and loan interest rate of personal housing loans.
The Chinese regulators’ measures were seen as their way of averting a crisis from exploding.
In China, housing sales have fallen sharply and prices are also falling. A lot of real estate developers have high debts and should have gone bankrupt a long time ago. However, the government did not allow them to go bankrupt, because once they go bankrupt, the properties they own must be auctioned, causing real estate prices to drop sharply, which the government is trying to avoid.
Citigroup recently estimated that the ratio of nonperforming loans related to real estate in Chinese banks has soared to 30%.
From the 16 bailout measures, the government is trying to save real estate private enterprises, ensure their delivery of unfinished buildings, as well as allow homebuyers to delay loan repayment.
But can the government save a collapsing property market?
SOH cited an analysis indicating that if this is just a localized short-term difficulty, the government could help to overcome the crisis, and it is also feasible to wait for an economic recovery.
But now China’s predicament is not a short-term matter or just in one locale. It is a long-term problem on a large scale: Foreign capital has fled, private enterprises have defaulted, the unemployment rate exceeds 20%, a large number of migrant workers have returned to their hometowns, and many people face remaining financially viable. So who can still buy a house?
In reality, these rescue measures are aimed at saving the financial system as the banks have already piled up bad debts and found it difficult to protect themselves.
But it could become a burden for the government when the Chinese economy slows down sharply, its financial resources are exhausted, and saving the real estate sector could drag it down.
Thirty-one provinces and cities in China are running out of money, and some local governments can no longer pay salaries. All rely on the central government to save lives. But where does the central government’s money come from? No one knows.