The governor of People’s Bank of China (PBOC, central bank), Pan Gongsheng assured that the real-estate market of the country, mired in a long crisis, has shown “some positive signs” and that has “solid foundations.”
“There have been some positive signs in the property market, which has solid foundations for healthy and stable long-term development. “Fluctuations in the real estate market have a limited impact on the (Chinese) financial system,” Pan said this week during a speech before representatives of national and international financial institutions, according to the BPC website.
The head of the central bank insisted that the Chinese economy “maintains good recovery inertia” that will make it capable of achieving the official growth objective for 2024, of “around 5%”something for which the institution “will continue to generate a monetary environment favorable to recovery.”
“In the future, we will still have ample room for maneuver at the policy level and a large reserve of tools”he added.
Likewise, Pan referred to fears about the debt accumulated by the country’s local and regional administrations, ensuring that the Chinese Government’s debt levels “It is at a medium-low level” compared to the international average and that “Measures to resolve local government debt risks are gradually taking effect.”
“China has built an effective financial safety net”guaranteed the BPC representative, who stressed that the financial system of the second world economy “operates solidly”: “Financial institutions are generally healthy, and have strong resistance to risks”.
Real estate crisis
Despite the optimism shown by Pan about the real estate market, the data point to a crisis that still does not seem to reach bottom and to a market that does not respond to support measures: commercial sales measured by land area plummeted by 24.3% in 2022 and another 8.5% in 2023, while new home prices fell in December at their fastest pace in almost nine years.
In addition, according to data from the specialized consulting firm CRIC, the sales of the hundred main developers in the country fell more than one 60% YoY in February.
The financial position of many Chinese real estate companies worsened after, in August 2020, Beijing announced restrictions on access to bank financing for developers that had accumulated a high level of debt, among which Evergrande stood out, with a liability of almost US$ 330,000 million.
In recent months, given the situation, the Government announced various support measures, with state banks also opening multimillion-dollar lines of credit to various promoters, to which the completion of projects sold off-plan was marked as a priority, a matter of concern. to Beijing for its implications for social stability, since housing is one of the main investment vehicles for Chinese families.
Pan’s comments also come shortly after rating agency Moody’s downgraded ‘trash’ the debt rating of China Vanke, the second largest real estate developer in the country and one of the few state-owned firms in the sector that still had a favorable grade, in the face of information that suggested that it would be suffering from liquidity problems.
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Source: Gestion
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