Over the past three decades, China has undergone a significant transformation in its housing market. In the past, much of the housing in Chinese cities was owned by state-owned enterprises, which provided homes to workers at low rents. However, the landscape has changed drastically since then, with the emergence of a booming commercial property market that has led to the construction of vast numbers of flats.
The recent slowdown in the property market has prompted the Chinese government to take action in an effort to stabilize the market. In an attempt to address the issue of unsold properties, the government has called upon state-owned enterprises to purchase these properties and convert them into affordable housing. This new policy was announced on May 17th by He Lifeng, China’s economic tsar, during an unusual video conference.
As part of this initiative, the country’s central bank will provide cheap loans amounting to up to 300 billion yuan ($42 billion) to 21 banks. These banks will then lend this money to eligible enterprises owned by city governments, which will utilize the funds to buy unsold flats from property developers. These unsold flats, once purchased, will be offered for sale or rent at below-market rates to low-income individuals.
This move represents a return to an old solution to address the challenges in China’s property market, as state-owned enterprises have historically played a significant role in providing housing to the population. By encouraging these enterprises to step in and purchase unsold properties, the government hopes to not only address the issue of excess inventory in the market but also provide affordable housing options for those in need.
The decision to involve state-owned enterprises in this initiative comes at a critical time for China’s property market, which has experienced a significant drop in sales since the peak of the last boom in 2020. By incentivizing these enterprises to purchase unsold properties, the government aims to revitalize the market and stimulate demand for housing.
The move also reflects a broader shift in China’s approach to housing policy, as the government seeks to strike a balance between promoting economic growth and addressing social issues such as affordable housing. By leveraging the resources and capabilities of state-owned enterprises, the government hopes to achieve both economic and social objectives through this initiative.
Overall, the decision to involve state-owned enterprises in purchasing unsold properties and converting them into affordable housing represents a proactive step by the Chinese government to address the challenges in the property market. By taking this action, the government aims to support economic growth, promote social welfare, and ensure the stability and sustainability of the housing market in China.
