What will China do about excess housing?

CHINA FINANCIAL - Report 20 May 2024 by Michael Pettis

Special points to highlight in this issue:

* The Third Plenum is scheduled to be held in July, much later than the expected October or November date last year. Most analysts believe the long delay suggests the lack of a consensus over how to address weak domestic demand, a rapidly contracting property sector, worsening trade conflict, and soaring debt.

* With home prices continuing to drop rapidly, along with new investment, much of the recent discussion has focused on various programs aimed at stabilizing the property market. The most discussed program involves getting local governments to purchase a substantial share of the housing overhang while returning some of the apartments to the market in the form of “affordable” rents. This will prove much easier said than done.

* The most recent data release shows the supply side of the economy outperforming expectations and the demand side underperforming. This means that Chinese growth this year has become more, not less, unbalanced.

Now read on...

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