Recently, Chinese officials said in a meeting that the financial
sector is focused on five major risks.
The most serious risk is property capital chain.
Experts analyze that any outbreak would impact
China’s economic trend.
A housing market crash will trigger a financial crisis.
China-based economist Gu Shengzu said at the Ninth
People’s Congress that five major risk areas in
China’s financial sector have occurred simultaneously.
First, risks in the real estate finance market may arise.
Second, the regional local government debt risk
has grown more prominent.
Third, excess capacity in the finance sector may arise.
Fourth, the shadow banking risk may arise.
Fifth, the coexistence of a structural liquidity mismatch risk,
excessive liquidity and the entire funding of the real economy.
Jason Ma, US-based economic commentator: “What he said
was a fact that everyone can see.
Most concerning to everyone is the large amount of local
debt, and the large percentage shadow banking takes.
These real figures would give international economists
or mainstream economists a chance to accurately assess
Gu Shengzu says that among the five risks,
property capital chain is the most serious.
Chinese media reported that the housing turnover in first-tier
cities dropped by 30 to 40 percent in the first half of this year.
Beijing is the worst.
As of June 26, only 22,782 new residential home units sold
in Beijing, a decline of 48.8 percent year-on-year.
The sale of residential units and commercial properties
hit a nine-year low year-on-year.
Sources say that in the first half of this year, a 30.4 percent
year-on-year decline took place in 11 Guangzhou districts
selling newly built homes within a 3.82 million square
A soufun.com statistic shows that in the first half of this year,
Shenzhen commercial and residential sales decreased
by 40 and 42 percent.
Wang Jianguo, Professor of Peking University:
“A real estate market crash will be very dangerous
to China’s economy and will cause financial crisis.”
At the start of the year, bankruptcy in China’s real estate
businesses was a consistent occurrence.
According to incomplete statistics, since March, over 10
bankruptcy cases occurred in Zhejiang, Jiangsu
and other provinces.
Loan defaults in two real estate companies in Fenghua city,
Zhejiang and Hangzhou city have brought construction
projects to a halt.
Executives were detained and accused
of illegal fundraising.
Real estate companies in first-tier cities also
encountered a capital chain outbreak.
In Shanghai, the Shimao International Plaza project came
to a halt in May when a developer capital chain fell apart.
The construction site was sealed by court.
Pan Gongsheng, deputy director of China’s Central Bank,
said in a June seminar that relying on home buying
as an investment could cause a housing bubble burst
and an economic crisis.
Jason Ma: “Over the past dozens of years, the Chinese
Communist Party (CCP) successfully fooled people into
investing in the housing market and the stock market
because there are no other investment methods.
Will the CCP continue to fool its people and have people
invest in real estate?”
In addition to the Central Bank request for commercial banks
to issue home loans timely in the first half of this year,
the local government consistently released policies
to stimulate the housing market.
Wuhan Housing Management Bureau relaxed a third home
purchase policy on residents as well as a policy
for non-residents to purchase a second home.
The bureau also requested banks not to reduce
first mortgage rates to take a mortgage loan business.
Meanwhile, the bureau prohibited developers
from dropping prices.
Developers who reduce the price by 15 percent
will be given a verbal warning.
A reduction of 20 percent will cause the closure
of their online sales.
The impact on the entire real estate chain
has been comprehensive.
The front-end is raw material — steel, cement,
The intermediate products are design,
construction projects, and décor.
The finished product is completed buildings and homes.
Thus, the real estate sector is linked to all aspects
of marketing activities.
Jia Kang, director of the Research Institute for Fiscal Science
at the Ministry of Finance, said that the government
will not ignore the real estate sectors’ tremendous fall.