It could be curtains for the loose policy environment in China’s property sector after warnings by a People’s Daily article against debt-fuelled growth, say analysts.
The article published on Monday cited an unnamed“authoritative” source as saying that boosting growth by increasing leverage is risky and “unrealistic”, warning that a high leverage ratio could trigger a systemic financial crisis. The source is believed to be from a top Chinese policymaking body.
“Property inventory should be cleared through urbanisation, instead of adding leverage,” the person said.
Alan Jin, a property analyst at Mizuho Securities, said he expects the central government to tighten the lending policy for the property sector.
“The concern is understandable. The growing housing bubble in China’s big cities has been caused by over-relaxed policy,” Jin said.
China has adopted a slew of easing measures, including six interest rate cuts and slashing the minimum down payment requirement, since late 2014 to rev up sales in a sector that generates more than 15 per cent of the gross domestic product (GDP). As a result, cheap credit has flooded the property market in first- and bigger second-tier cities, pushing up prices in what many see as an already overheated market.