The Chinese government has introduced a new housing stimulus plan to prevent a downturn in the real estate market, but experts predict that it will take considerable time for the market to hit bottom.
Wang Dan, chief economist for China at Eurasia Group, stated at the Asia Vision Forum in Singapore on September 29 that housing prices in China continue to decline and that the real estate market may adjust to levels seen in 2014.
Wang remarked, "The bottom of the Chinese real estate market is still far off," and projected that housing prices will continue to fall from now until 2030. However, he did not provide specific reasoning for considering 2014 prices as a reasonable benchmark. He also assessed that the real estate slump significantly impacts the broader Chinese economy, noting that the market adjustment affects not only housing investments but also household asset values, local government finances, related industries, and consumer sentiment.
He highlighted the diminished financial capacity of local governments as a major constraint on the Chinese economy. Local governments face numerous expenditures but have seen their financial resources shrink due to the real estate market slump, leading to fewer profitable investment opportunities.
Despite this, Wang does not view the long-term outlook for the Chinese economy as pessimistic. He believes the next five years will be crucial for China's economic development and anticipates that the country will maintain a significant position in the global supply chain. He forecasts that, despite population decline and sluggish domestic demand, sustained long-term R&D investment and productivity improvements could enable China's GDP to grow at an average rate of at least 4.6% annually until 2035.
Wang also pointed out that China's export-driven growth model is unlikely to be sustainable in the long run. As China focuses on long-term competition with the United States, it has been relatively less proactive in implementing subsidies or support policies to directly boost consumption. Consequently, the necessary economic rebalancing from export and manufacturing-led growth to consumption-driven growth has not yet been fully realized.
Meanwhile, on September 29, the Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration announced a policy to support interest rates on housing loans for first-time homebuyers. Starting October 1, eligible buyers can receive interest support of up to 1 percentage point on housing loans of up to 1 million yuan for a maximum of five years. Earlier, on September 28, Premier Li Qiang stated that the State Council would explore additional policies to stabilize the real estate market and expand domestic demand.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.