“Hong Kong: As China’s unprecedented housing downturn enters its third year, President Xi Jinping appears to be growing increasingly concerned, sparking speculation about potential quantitative easing measures and fueling a surge in Chinese stocks listed on the Hong Kong exchange.”
The Politburo’s meeting on April 30 signaled a potential change in strategy regarding China’s housing crisis. The emphasis on coordinated measures to handle existing housing stock suggests a departure from previous approaches and hints at a more proactive stance from the government in addressing the ongoing downturn. This shift in rhetoric has sparked optimism among investors, leading to a bullish trend in Chinese stocks listed on the Hong Kong exchange.
The last mention of real estate inventory issues by the Politburo dates back to mid-2016. At that time, the government initiated a substantial stimulus effort focused on slum redevelopments. This initiative saw the People’s Bank of China releasing over 3 trillion yuan (approximately US$416 billion) in pledged lending to support the endeavor.
That initiative pulled China’s property and stock markets out of a slump. Since Beijing has been floating the idea of urban village renovation lately, Xi is essentially opening the door to his second bazooka.
The Politburo’s ambiguous language raises two key questions. Firstly, what factors led to Xi Jinping’s shift in approach, considering his previous passive stance during the real estate crisis? Secondly, what scale of state funding can be expected this time to address the housing market challenges effectively?
A plausible explanation is that, beyond the broader economic slowdown, China’s property crisis is now affecting Xi Jinping’s cherished state-owned enterprises (SOEs).
