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China Vows to Adjust Policies for Property Sector and Focus on Stable Employment
China's Response to Economic ChallengesChina's top leaders have promised to make timely adjustments and optimization to the policies surrounding the country's struggling property sector. They also emphasized the importance of stable employment as a strategic goal. In addition, the leaders made pledges to boost domestic consumption demand and address local debt risks. These decisions were made during a recent quarterly meeting of the Politburo, chaired by President Xi Jinping. The meeting typically sets the tone for China's economic policies for the second half of the year.
The leaders acknowledged that the economy is facing new difficulties and challenges, including insufficient domestic demand, operational issues for certain enterprises, risks and hidden dangers in key areas, and a complex external environment. They also recognized that the post-pandemic economic recovery will happen in a wave-like fashion and will be a tortuous process.
Focusing on Property Market ChangesObservers noted that the Politburo removed the phrase "housing is for living in, not speculation" from its discussions on the real estate sector. Instead, they mentioned the need to adapt to major changes in the demand-supply dynamics of the property market. The leaders also highlighted the importance of city-specific measures to meet residents' essential housing needs and revitalize idling properties.
The country's property sector has been struggling since the government cracked down on its debt levels in August 2020. Over the years, excessive growth in the sector has led to the construction of ghost towns and an oversupply of properties. Some estimates suggest that the property sector still accounts for up to a quarter of China's annual economic activity.
Boosting Domestic Demand and ConsumptionChina's leaders have committed to actively expanding domestic demand and raising income levels to promote consumption. This aligns with their earlier plans to restore and expand consumption, which includes measures to boost household income, improve the business environment for private firms, and stabilize youth employment. In addition, the leaders have emphasized the need to boost consumption in sectors such as automobiles and electronic products.
The Politburo also highlighted the importance of government investment, although specific details were not mentioned. They also plan to accelerate the issuance and use of local government special bonds. However, analysts believe that the focus will primarily be on supporting employment rather than providing direct handouts to households.