Strict Control on Real Estate Inflow via Illicit Loans Likely to Become Top Priority for Housing Price Stability
Agenda Discussed at Central Political Bureau Meeting Under Review at Economic Work Conference
[Asia Economy Beijing=Special Correspondent Jo Young-shin] Chinese authorities are expected to prioritize real estate stability as the top priority in next year's economic management policy.
State-run Xinhua News Agency reported on the 9th that the Central Political Bureau meeting held ahead of the Central Economic Work Conference focused on "people's livelihood (real estate)." The issues discussed at the Central Political Bureau meeting are usually submitted as major agenda items for the Economic Work Conference.
Xinhua reported that the Central Political Bureau meeting held on the 6th discussed next year's economic direction with a focus on people's livelihood areas such as housing, employment, childbirth, and public services. In particular, policies on the construction of guaranteed rental housing and housing sales to meet the reasonable demands of buyers were reportedly discussed.
In this regard, the Communist Party's official newspaper, the People's Daily, reported that the real estate market has a decisive impact not only on the financial market but also on economic stability and smooth operation, and that measures to promote the sound development and virtuous cycle of the real estate industry were discussed at the Central Political Bureau meeting.
The People's Daily identified the most urgent issue as resolving housing difficulties for citizens and youth in large cities. It emphasized that rising real estate prices exacerbate housing difficulties for young people and stressed that housing is for residence, not speculation. Since resolving housing difficulties for urban residents and youth is closely related to common prosperity, the Chinese government is expected to further strengthen regulations on real estate to stabilize housing prices.
In fact, the People's Daily reported that at the Central Political Bureau meeting, measures to strictly control illegal loans to prevent funds intended to support the real economy from flowing into the real estate market were discussed.
Regulations on real estate development companies are also expected to continue. The People's Daily emphasized that the chronic problem of high-leverage, high-debt development models in the real estate market can no longer be sustained, and that the "three red lines" set by Chinese authorities will be strictly enforced. The three red lines refer to ▲a debt-to-asset ratio excluding advance receipts of less than 70%, ▲a net debt ratio (debt minus liquid assets divided by equity) of less than 100%, and ▲a cash-to-short-term debt ratio of less than 100%. Real estate developers failing to meet these criteria are expected to be excluded from the market without exception.
Xinhua explained that along with people's livelihood, "stability" and "domestic demand" were also intensively discussed. It hinted that the Economic Work Conference will address plans to continuously implement the proactive fiscal policy and moderate monetary policy repeatedly emphasized by the Chinese government to induce stable economic development. However, since there has been internal criticism that this year's proactive fiscal policy was "not proactive," it is highly likely that the Chinese government will inject funds into the market next year.
Xinhua also pointed out the need to pay attention to consumption expansion strategies. The dual circulation policy, which aims to make domestic demand an internal growth engine through consumption recovery, may become more concrete. To this end, Xinhua added that ▲strengthening intellectual property protection, ▲enhancing core competitiveness of manufacturing and supply chain resilience, and ▲promoting balanced regional development will be pursued next year.
Considering that Chinese state media reported the details of the Central Political Bureau meeting, it appears that the Economic Work Conference is currently underway. The Economic Work Conference, attended by top Chinese officials including President Xi Jinping, is the meeting that finalizes China's economic policy direction for the coming year.
Meanwhile, with the Chinese Academy of Social Sciences forecasting China's economic growth rate at 5.3% next year, there are expectations that the Chinese government's economic growth target for next year will be "above 5%." This year's growth target was "above 6%."
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