China’s property market is going in 2 directions, says ex-PBOC advisor

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China's property market is showing signs of bifucation: Former PBOC advisor

China’s real estate sector is going in “two directions,” and even though further stimulus is expected, a recovery will not likely happen soon, according to a former advisor to the People’s Bank of China.

“The property market right now in China is actually two-fold. It’s actually going into two directions,” Li Daokui, now a professor of economics at Tsinghua University, said Friday.

China’s property market has been rocked by faltering consumer confidence in real estate companies as property giants Evergrande and Country Garden face debt woes. Country Garden just narrowly avoided default while Evergrande has filed for bankruptcy protection.

China’s house prices slipped in July, falling 0.1% year-on-year after a brief recovery in May and remaining flat in June.

Asked if Beijing’s policy response should be “bolder,” Li said there are “many meetings, discussions, deliberations which are [unseen] below the water.”

Market participants don’t not see enough signs of such policies, he said on CNBC’s “Squawk Box,” but “a lot of policies will go out” in the next two months, he predicted.

They will likely include those that “stabilize the finances of the largest property developers. So any possibility of financial panic should be, and will be dispelled,” he added.

A tale of two property markets

The slowdown in China’s property market is not uniform, Li pointed out.

“In the largest cities, like Beijing and Shanghai, good properties… relatively large apartments are being sold at a much faster pace than before.”

A man walks past a housing complex by Chinese property developer Evergrande in Guangzhou, China’s southern Guangdong province on September 17, 2021.

Noel Celis | Afp | Getty Images

So any possibility of financial panic should be and will be dispelled.”

Li Daokui

Professor of Economics, Tsinghua University

On Wednesday, China’s state-owned Securities Times published a commentary calling for the lifting of “policies restricting property purchases in cities other than the hottest top tier cities” as soon as possible, according to a CNBC translation.

“In the current situation where there are major changes in the demand-supply relationship in the property market, it is no longer appropriate to retain restrictive policies that were previously implemented to curb speculation,” the commentary said.

It concluded that there was an “urgent need” to increase policy support to boost sales, thereby releasing demand suppressed by these rigid housing policy.



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