A New ‘Band-Aid’ for China’s Property Market: Can It Stop the Bleeding?
The following is an excerpt from Lizzi C. Lee's op-ed in the Diplomat. Lizzi is a Fellow on Chinese Economy at the Asia Society Policy Institute's Center for China Analysis.
In an attempt to stabilize its troubled property market, China has launched a series of new support measures to address the sector’s escalating crisis. These recent initiatives, announced by the Ministry of Housing and Urban-Rural Development at a State Council press conference, signal a shift in approach, emphasizing the sale of fully finished homes and providing new financial lifelines for developers.
A central component of Beijing’s new strategy is the nationwide expansion of a policy first piloted in Zhengzhou, which mandates the sale of completed homes. This marks a departure from the longstanding practice of pre-selling unfinished properties. The aim is to restore buyer trust — a trust that has been eroded by years of project delays and developer defaults. Deputy Housing Minister Dong Jianguo’s assertion of a “vigorous and orderly” expansion of finished home sales highlights the government’s determination to stabilize the sector.
Complementing this approach is a proposal allowing local governments to issue special bonds for purchasing unsold properties. This dual-pronged strategy seeks to address both supply and demand issues. By converting excess inventory into affordable housing, authorities hope to alleviate developers’ financial strains while simultaneously addressing the housing needs of low-income groups.
Xi Jinping’s recent announcement of sweeping goals to strengthen the financial stability of China’s heavily indebted local governments and grant them greater autonomy in managing property markets has sparked speculation about potential new strategies. The ruling Communist Party has announced its commitment to accelerating the development of a housing model that prioritizes renting, alongside expanding the construction of affordable housing to address the needs of the working class. However, the specifics of these initiatives remain unclear.
