Prospective buyers examine a real estate model in Huai’an, Jiangsu Province Photo: Xinhua
China does not have the structural shortcomings that will trigger a subprime mortgage crisis like the one that occurred in the United States in 2007, as the country’s demand for urban and rural housing continues to rise under regulatory measures to prevent and manage risks in the real estate market, a former head of the People’s Bank of China (PBC) said on Sunday.
Dai Xianglong, former governor of the PBC, the central bank, made the remarks after housing price growth decelerated, with large numbers of vacant commercial properties in some towns affected by the debt of Evergrande, which has been described by some foreign media as “the Lehman Brothers moment in China” which could have a negative effect on the world’s second largest economy.
Speaking at a financial forum, Dai said China has long taken measures to prevent and address real estate market risks.
The former PBC chief noted that the central bank announced plans to reduce the reserve requirement ratio of commercial banks aimed at increasing market liquidity, after the Political Bureau of the Communist Party of China Central Committee shut down. met on December 6, proposing to “promote the construction of subsidized housing and support the commercial housing market to better meet the needs of homebuyers.”
At the same forum on Sunday, many analysts also noted that the short-term risks facing individual housing companies will not affect the normal medium- and long-term funding function of the market.
Three major Chinese financial regulators, including the PBC, have reassured markets that the Evergrande issue is an individual case and should not be of concern to the country’s capital and real estate market.
Additionally, at the central economic labor conference that set the tone that ended on Friday, key policymakers called for efforts to explore new models for the industry such as the development of a gas market. long term rental, while reaffirming that “homes are made for living, not for speculating.”
The decision will effectively control and reduce the risks of the real estate sector and promote a virtuous circle and healthy development of the sector, according to the meeting.
“The model of relying on rising house and land prices for profit will change with the further implementation of the property tax, which will not only reverse misconceptions of housing investment and of lucrative speculation, but will also help the concept of housing consumption gained a foothold, ”Yan Yuejin, research director at the Shanghai-based China R&D Institute E-house, told Global Times on Sunday.
Yan noted that the meeting put forward the concept of forward guidance, indicating that the authorities will take further steps based on current expectations.
China will continue to promote the supply of land and deepen the rectification of behaviors that may cause volatile expectations, including speculation on house prices, according to Yan.