Mainland Real Estate Companies Face Debt Crisis, CCP Authorities Focus on Destocking
Mainland real estate companies have fallen into a debt crisis, prompting Chinese Communist Party authorities to prioritize destocking measures. Popular cities like Hangzhou and Xi’an have recently relaxed purchase restrictions, drawing criticism from netizens. Analysts warn that the real estate industry’s downturn has left local governments struggling to survive, with relevant departments struggling to assign blame. Mainland economists have publicly criticized the loosening of property market policies.
Hangzhou and Xi’an’s decision to lift housing purchase restrictions on May 9 has stirred controversy in the market. These two hot second-tier cities fully eliminated the housing purchase restriction policy after the Political Bureau meeting of the CPC Central Committee on April 30. The continuous tightening and loosening of property market policies in key cities indicate a focus on “destocking” as set by top CCP leaders.
The news of Hangzhou and Xi’an lifting purchase restrictions has dominated online discussions, with many netizens mocking the move. Some expressed disbelief, with comments like, “I don’t buy a house because of purchase restrictions but because I don’t have money.” Others questioned the need for restrictions to be lifted, suggesting that it only benefits those with means to buy multiple properties.
Analysts point out that the sharp decline in real estate company sales from January to February 2024 signals a severe backlog of properties. Failure to clear this inventory could lead to bankruptcies for many developers and financial strain on local governments. There is concern that without action, the situation could worsen, affecting the overall economy.
Economists like Ren Zeping caution against putting too much hope in relaxed purchase restriction policies. They argue that restoring residents’ spending power and confidence is key to reviving the real estate market. With major cities like Beijing, Shanghai, and Guangzhou yet to fully lift purchase restrictions, the effectiveness of such measures remains in question.
As mainland China grapples with a struggling real estate sector, the debate over policy responses continues. The fate of the housing market and its implications for the broader economy remain uncertain, with concerns mounting over the ability of authorities to address the crisis effectively.