Beijing unveils sweeping action plan to tackle property crisis
Semafor Signals: Global insights on today’s biggest stories.
Program is expensive, and may not revive sector
Beijing is hoping to tackle the long-running property crisis head-on. But the cost of purchasing so many homes is huge, and it’s unclear how cash-strapped local governments will pay for them: Only the central government or the People’s Bank of China would have the capital to buy empty homes en masse, The Wall Street Journal reported. The announcement follows growing calls for the government to step in, Reuters noted, but analysts aren’t sure if the move will stimulate housing demand. “Clearing inventory will increase cashflow to developers and help their financial stability, but it does not address private sector confidence,” one financial analyst told the news agency.
Fall of another property firm could hurt the government
Chinese real estate developers have struggled to keep up with the slumping market, and the two leading firms, Evergrande and Country Garden, collapsed in recent years under the pressure. On Saturday, property firm Vanke is expected to put 19,000 square meters of land up for sale in the city of Shenzhen, The Economist reported, and will list it at just 23% of its purchase price. Vanke’s issues are significant: The firm is state-backed, meaning it has greater access to capital than companies that are entirely private, the outlet noted. “If the company defaults, trust in all state-backed developers … would be under threat.” Meanwhile, analysts fear that if Vanke falls it will “break China’s back,” and could rock the public’s confidence in the government.
Sales downturn hurting younger workers
The property sector’s downturn is hitting employees hard, Fortune reported. Around 500,000 workers have lost their jobs in the dip, many of them young professionals newly out of university. Some are now retraining, as youth unemployment remains high. Others are taking deep pay cuts to stay employed, with one former Vanke employee telling Fortune that he once took a 90% wage decrease, and spent a year searching for work after losing his job. “There’s no future in this industry,” the employee said. “The sector’s been abandoned.”
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