{"id":145003,"date":"2021-11-18T08:31:43","date_gmt":"2021-11-18T08:31:43","guid":{"rendered":"https:\/\/precoinnews.com\/?p=145003"},"modified":"2021-11-18T08:31:43","modified_gmt":"2021-11-18T08:31:43","slug":"china-walks-a-tightrope-on-property-clampdown","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/","title":{"rendered":"China walks a tightrope on property clampdown"},"content":{"rendered":"<p>BEIJING (Reuters) &#8211; China\u2019s property sector, a major driver of economic growth, has weakened sharply this year as Beijing cracks down on speculators and indebted developers in a broad push to ease financial risks, with prices of new homes down for the first time in six years.<\/p><figcaption>FILE PHOTO: Buildings of residential compounds are seen in Shanghai, China August 11, 2020. REUTERS\/Aly Song\/File Photo<\/figcaption><p>In the near term, many analysts expect authorities will try to stabilise the sector, which accounts for a quarter of gross domestic product by some measures, although there is uncertainty over which policy levers Beijing would pull.<\/p>\n<p>Authorities would have to address and navigate challenges on multiple fronts: debt risks, cost-of-living pressures, worried homeowners, and the need to boost economic growth.<\/p>\n<h2>DEBT RISKS<\/h2>\n<p>Concerns over growing financial risks are a primary driver of the crackdown.<\/p>\n<p>China\u2019s property sector is heavily reliant on credit. As of the end of the second quarter, Chinese developers owed 33.5 trillion yuan ($5 trillion), or a third of the country\u2019s GDP, according to Nomura.<\/p>\n<p>Since authorities last year unveiled the \u201cthree red lines\u201d &#8211; a significant policy plank aimed at limiting developers\u2019 liabilities-to-assets, net debt-to-equity, and cash-to-short term borrowing ratios &#8211; many companies have grown desperately short of cash.<\/p>\n<p>GRAPHIC: Cost of housing in China&#8217;s big cities far outstrips incomes<\/p>\n<p>A string of missed offshore debt payments and sell-offs in shares and bonds followed, with China Evergrande Holdings, the world\u2019s most indebted developer, repeatedly lurching to the brink of default.<\/p>\n<p>Bankers and analysts say that Beijing is unlikely to relax the \u201cthree red lines\u201d policy any time soon.<\/p>\n<h2>COST OF LIVING<\/h2>\n<p>Authorities have also slapped lending restrictions on mortgages to deter speculative home buying.<\/p>\n<p>China\u2019s major cities have some of the highest-priced real estate in the world compared to average local earnings.<\/p>\n<p>It would take decades of savings to afford an apartment in Beijing, Shanghai or Shenzhen for someone with a standard salary in those cities.<\/p>\n<p>GRAPHIC: China tier one city house prices<\/p>\n<p>Many who work in these megacities must eventually return to their home towns or move to cheaper inland cities. Cost-of-living pressures have led some young people to embrace a passive lifestyle known as \u201clying down.\u201d<\/p>\n<p>President Xi Jinping has pledged to reduce inequality and ensure that housing is for living in, not speculation.<\/p>\n<p>GRAPHIC: China&#8217;s households put their wealth in real estate<\/p>\n<p>Prices of new homes dropped 0.2% on average last month from September, according to Reuters calculations, the first decline since 2015.<\/p>\n<h2>HOMEOWNER INTERESTS<\/h2>\n<p>On the whole, the interests of millions of concerned homeowners are likely to act as an important brake on government policy to excessively cool the sector, say analysts.<\/p>\n<p>Some two-thirds of the wealth of China\u2019s 1.4 billion people is tied up in residential property. Over 90% of urban households own homes, one of the highest rates in the world.<\/p>\n<p>Buying is fuelled by expectations that the government will ensure sustained growth in the sector, as well as by strong social pressures to purchase a house before marriage.<\/p>\n<p>GRAPHIC: China&#8217;s real estate sector has global weight<\/p>\n<p>Worries that a too-rapid slowdown could spark a market freefall and social unrest will weigh heavily on China\u2019s stability-obsessed government as it tries to balance the risks and rewards of pushing through reforms.<\/p>\n<h2>GROWTH WORRIES<\/h2>\n<p>Concerns over growth could also limit regulators.<\/p>\n<p>Property and related industries account for about a quarter of China\u2019s GDP, analysts estimate, and drive demand for mountains of steel, cement and other materials.<\/p>\n<p>GDP growth is already slowing sharply this year, with the pace easing off to just 4.9% in the third quarter from a blistering 18.3% in the first.<\/p>\n<p>GRAPHIC: China GDP by sector<\/p>\n<p>A further significant economic downturn could have ramifications across the world.<\/p>\n<p>If China\u2019s current property slump follows the pattern of the last one in 2014-2015, global GDP growth could be dragged 0.7 percentage points lower in the last quarter of 2022, with metal and iron ore prices plummeting, according to a report by analysts at Oxford Economics.<\/p>\n<p>A more severe deterioration could have China\u2019s GDP growth bottoming out at 1.0% in the first three months of 2023, and global growth taking a substantial hit.<\/p>\n<p>\u201cThe worst hit countries would be those for whom exports to China are particularly important and commodity exporters,\u201d said the Oxford analysts.<\/p>\n<p>Source: <a href=\"https:\/\/www.reuters.com\/article\/china-property-debt-clampdown-graphic\/china-walks-a-tightrope-on-property-clampdown-idUSKBN2I30G2\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>BEIJING (Reuters) &#8211; China\u2019s property sector, a<\/p>\n","protected":false},"author":3,"featured_media":145002,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23051],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>China walks a tightrope on property clampdown - Pre Coin News<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"China walks a tightrope on property clampdown - Pre Coin News\" \/>\n<meta property=\"og:description\" content=\"BEIJING (Reuters) &#8211; China\u2019s property sector, a\" \/>\n<meta property=\"og:url\" content=\"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/\" \/>\n<meta property=\"og:site_name\" content=\"Pre Coin News\" \/>\n<meta property=\"article:published_time\" content=\"2021-11-18T08:31:43+00:00\" \/>\n<meta name=\"author\" content=\"mediabest\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/precoinnews.com\/wp-content\/uploads\/2021\/11\/China-walks-a-tightrope-on-property-clampdown.jpg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"mediabest\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/\",\"url\":\"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/\",\"name\":\"China walks a tightrope on property clampdown - Pre Coin News\",\"isPartOf\":{\"@id\":\"https:\/\/precoinnews.com\/#website\"},\"datePublished\":\"2021-11-18T08:31:43+00:00\",\"dateModified\":\"2021-11-18T08:31:43+00:00\",\"author\":{\"@id\":\"https:\/\/precoinnews.com\/#\/schema\/person\/ad0e9920e03d3b41c7ad02a18375d76a\"},\"breadcrumb\":{\"@id\":\"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/precoinnews.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Business\",\"item\":\"https:\/\/precoinnews.com\/category\/business\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"China walks a tightrope on property clampdown\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/precoinnews.com\/#website\",\"url\":\"https:\/\/precoinnews.com\/\",\"name\":\"Pre Coin News\",\"description\":\"precoinnews.com\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/precoinnews.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/precoinnews.com\/#\/schema\/person\/ad0e9920e03d3b41c7ad02a18375d76a\",\"name\":\"mediabest\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/precoinnews.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/f5f13cb3b94fc348d515c0951f6ca073?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/f5f13cb3b94fc348d515c0951f6ca073?s=96&d=mm&r=g\",\"caption\":\"mediabest\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"China walks a tightrope on property clampdown - Pre Coin News","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/precoinnews.com\/business\/china-walks-a-tightrope-on-property-clampdown\/","og_locale":"en_US","og_type":"article","og_title":"China walks a tightrope on property clampdown - Pre Coin News","og_description":"BEIJING (Reuters) &#8211; 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