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On Thursday, China unveiled new measures to support its struggling real estate market.
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The measures include faster lending to developers and support for renovations in urban slums.
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But analysts say the new measures are not enough to solve the market’s structural challenges.
Chinese officials have targeted a wave of stimulus measures at the country’s troubled real estate market, but the efforts have done little to impress Wall Street experts.
On Thursday, China unveiled new measures to support its faltering housing market, including faster access to credit for developers and renovation work in neglected urban areas.
The government’s ‘white list’ of unfinished housing projects eligible for government financing will now receive more money to encourage banks to increase lending to these projects, the Housing Ministry said at a press conference.
The money will reach 4 trillion yuan ($550 billion) by the end of the year, almost double the current quota of 2.2 trillion yuan.
The Housing Ministry also unveiled plans to modernize the country’s neglected urban neighborhoods, or ‘urban villages’, with planned renovations of a million apartments.
While the efforts appear to be a major attempt by Beijing to solve a problem at the heart of the economic crisis, Wall Street analysts are disappointed.
Experts from Goldman Sachs, BCA Research and AXA Investment Managers struck a pessimistic tone this week about the new policy’s potential to revive China’s real estate sector.
Analysts at Goldman Sachs said the measures could provide some help to real estate financing, home completions, housing transactions and prices in major cities, but they will not be enough to combat the market’s structural problems.
“Given the many structural challenges in the real estate sector and still limited policy support for deleveraging housing inventory, we continue to believe that there appears to be no quick fix for the real estate sector nationwide,” Goldman Sachs said in a note on Friday.
Analysts at BCA Research echoed that view, saying the details of the plan were “disappointing.”
They pointed in particular to the latest targets of the country’s ‘whitelisted’ project lending, which they say have so far been unsuccessful amid a fragmented real estate market and banks’ reluctance to lend to risky projects.
They also said the apartment renovation plan is short on details and mirrors a similar program introduced in 2015 that aimed to renovate 6 million units annually over several years. However, the latest plan does not provide a clear timeline.
The analysts also warned that the country’s faltering economy could even lead to a global recession.
“While a step in the right direction, these stimulus measures so far fall short of the scope and scale needed to restart China’s economy. The announced stimulus measures should set a floor for activity sometime in 2025, but we expect this to be too little. “It is too late to prevent a global recession,” the analysts said in a Friday note.
Thursday’s new policy sparked a rally in the CSI 300 index, which rose 3.6% on Friday.
But Yingrui Wang, Chinese economist at AXA Investment Managers, says the optimism could be short-lived as the housing market stimulus is short on details.
“The recent monetary easing measures initially boosted sentiment in the stock market, and today’s launch of the PBoC share buyback facility has created new momentum. However, delays and a lack of details in fiscal policy may soon dampen this optimism. Wang said in a Friday note.
The market recovery was also helped by new growth figures, showing that the economy grew by 4.6% in the third quarter, compared to the same period last year. That represents a slight slowdown compared to the 4.7% growth in the second quarter, but is narrowly better than forecasts of 4.5% growth.
The latest figure puts growth this year at 4.8% – just below the country’s annual target of ‘around 5%’.
Wang says the latest figures make China’s growth target more likely. Until the country’s first stimulus measures, first announced late last month, Wang predicted Beijing’s target seemed increasingly lofty.
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