Potential buyers look at a real estate model in Huai’an, Jiangsu province. Photo: Xinhua
China does not have structural shortcomings that could trigger a subprime mortgage crisis like the one that occurred in the United States in 2007, as demand for the country’s urban and rural housing continues to rise under of regulatory measures aimed at preventing and managing real estate market risks, a former head of the People’s Bank of China (PBC) said on Sunday.
Dai Xianglong, former governor of the PBC, the central bank, made the remarks after a deceleration in the growth of house prices, with a large number of vacant commercial properties in some cities affected by the debt of Evergrande, which has been described by some foreign media as “China’s Lehman Brothers moment” that could have a negative effect on the world’s second-largest economy.
Speaking at a financial forum, Dai said China has long been taking measures to prevent and resolve property market risks.
The former PBC chief noted that the central bank announced plans to cut the reserve requirement ratio for commercial banks aimed at increasing market liquidity, after the Political Bureau of the Communist Party of China Central Committee held a meeting on December 6, proposing to “promote the construction of subsidized housing and support the commercial housing market to better meet the needs of buyers”.
At the same forum on Sunday, many analysts also noted that the near-term risks facing individual housing companies will not affect the market’s normal mid-to-long-term funding function.
Three major Chinese financial regulators, including the PBC, have moved to reassure markets that the Evergrande issue is an individual case and should not be of concern to the country’s capital market and property market.
Additionally, at the central economic work conference that set the tone on Friday, top policymakers called for efforts to explore new models for the industry, such as developing a long-term rental market. , while reiterating that “houses are for living, not for speculating.”
The decision will effectively control and reduce the risks of the real estate sector and promote a virtuous circle and the healthy development of the sector, according to the assembly.
“The model of relying on rising house and land prices to make a profit will change with the further implementation of the property tax, which will not only reverse bad ideas for housing investment and speculation for profit, but will also help the concept of housing consumption gain a foothold,” Yan Yuejin, research director at the Shanghai-based E-house China Research and Development Institute, told the Global Times on Sunday.
Yan noted that the meeting highlighted the concept of forward guidance, indicating that authorities will take further steps based on current expectations.
China will continue to promote land supply and deepen rectification of behaviors that can cause unstable expectations, including house price speculation, Yan said.