BEIJING – China needs to do more to address its real estate crisis, the International Monetary Fund said on Friday.
The property market accounts for about a quarter of China’s GDP and has slowed, particularly after Beijing curbed major leverage for developers in 2020.
Chinese authorities have recently moved to ease financial restrictions on the sector. several months.
“The authorities’ recent policy measures are welcome, but we believe that further steps are needed to end the real estate crisis,” said Thomas Helbling, deputy director of the IMF’s Asia and Pacific Department, in a press conference.
“If you look at the measures, a lot of them are about financial issues for developers that are still in relatively good financial shape, so that helps,” he added in an interview with CNBC. “However, the problems of real estate developers’ serious financial difficulties have not yet been addressed.” “The wider issue of the large number of apartments in progress has yet to be addressed.”
In China, apartments are usually sold to home buyers before completion. Construction and financial difficulties have slowed construction so much that some homebuyers suspended their mortgages in protest last summer.
Chinese authorities later emphasized the need to help developers build these pre-sold apartments. However, home sales in China fell nearly 27% last year, while property investment fell 10%, according to official data.
“I think it would be helpful to show the way out and… how the restructuring could happen and who would cover the loss if there was a loss,” Helbling said. He also called for more resources to fix the large, pending housing stock.
Otherwise, the industry will continue to decline and remain a risk, also limiting households that are overburdened by the real estate sector, where cash and savings are linked, and undermining the broader economic recovery.
Helbling declined to name a specific deadline for authorities to act before the situation worsens.
“The sooner you address mitigation risks, the better.”
China says it is not a crisis.
The IMF analysis was part of the organization’s latest report on China, which followed annual talks with Chinese officials that ended in November.
Officials shot dead the leader of the People’s Republic of China, Zhengxin Zhang, and chief adviser Xuefei Bai of the IMF on real estate evaluation, according to the January 12 statement of the IMF report.
China’s real estate market has generally been running smoothly and “is not in crisis,” the statement said, and the industry’s situation is “a natural development of slump and waste in recent years.”
“The related risks are localised and concern only individual companies, and their impact on the rest of the world is relatively small,” said central bank representatives. According to China, in the future efforts will be made to ensure the supply of ready-made housing and to connect developers.
Chinese real estate stocks, including Country Garden, Longfor and R&F Properties have nearly doubled or more in the past 60 trading days, a period of about three months, according to Wind Information. However, trading in the shares of former giants Evergrande, Shimao, and Sunac has been suspended as of March 2022.
A report by the International Monetary Fund noted that a significant number of investors in China’s manufacturing bonds have suffered.
“As of November 2022, developers who have defaulted or are likely to default—with an average bond price below
“0 percent of face value—which accounted for 38 percent of the 2020 market share of companies with bond prices available,” the report said.
“The shrinking of the sector also creates tension for local governments.” The decrease in income from the sale of land reduced their tax capacity, while the financial vehicles of local governments (KOV) also significantly increased land purchases.
The International Monetary Fund on Monday raised its global growth expectations for the year due to better-than-expected growth in major countries at the end of last year, easing inflationary pressures, and the end of China’s COVID controls.
The new global forecast of 2.9% is 0.2 percentage points better than expected in October. But that’s still a slowdown from 2022’s 3.4percent growth.
For China, the IMF forecasts 5.2 percent this year, faster than 3 percent in 2022.
