Introduction

The last few months of the year will provide more clarity on China’s economic prospects and potential government support, particularly for the crucial real estate sector.

China’s economic recovery from the COVID-19 pandemic has slowed since April, and the property market has experienced a significant decline despite the easing of buying restrictions in many major cities.

Experts predict that the central government will gradually loosen regulations and that the housing market will stabilize within the next six months.

The struggles of the real estate sector have had a negative impact on consumption and local government finances, as the industry once accounted for a quarter of China’s economy.

Economists anticipate that real estate will not experience significant growth in the future, and housing market weakness will persist with a gradual decline in prices.

The government aims for a controlled decline rather than a sudden adjustment to prevent significant social consequences, as housing represents a large portion of household wealth.

Experts expect the central government to allow local governments to borrow more money to repay their long-term debt, which could contribute to a full economic recovery by the middle of next year.

Beijing implemented new restrictions on real estate developers’ financing in 2020 to curb their high reliance on debt. COVID-19 restrictions further dampened homebuyer appetite, causing developers to delay construction on projects.

While the decline in the real estate sector was intentional, experts believe it will take time for the market to recover fully.

Recent headlines about China’s real estate sector, including the liquidity problems faced by Evergrande, have negatively impacted both domestic and international sentiment.

Foreign businesses have grown pessimistic, and many are confused about Beijing’s economic policies.

Experts believe that a lack of confidence in the Chinese economy contributes to its slowdown.

China’s ruling Communist Party is expected to hold the Third Plenum, a meeting focused on longer-term aspects of the economy, and the National Financial Work Conference in the coming weeks.

These meetings are part of China’s existing structure, but recent policymakers have become less likely to make major announcements before high-level directives are clear.

The establishment of new commissions for finance and technology oversight is also expected to take effect by the end of the year.

There is ongoing debate about the necessary measures to support the Chinese economy, as it continues to experience modest growth.

Experts believe that China has the potential to achieve a 5.5% annual GDP growth rate in the long term, supported by a high savings rate and leadership in new energy vehicles, renewables, and advanced technology.

Data from Nomura indicates that the real estate sales slump has moderated, and retail sales and industrial profits have exceeded expectations.

While some economists have lowered their growth forecasts for China, expectations remain close to or slightly lower than the official target of around 5%.

Despite challenges in China’s real estate sector and concerns about economic policies, experts remain cautiously optimistic about the country’s ability to stabilize and recover.

Policy stability and a gradual decline in housing prices are seen as essential factors for sustainable economic growth.

China’s upcoming policy meetings will shed more light on the government’s plans and potential support for various sectors.