Beijing likely to loosen its grip on the housing market as exports cool, analysts say
- Policies to boost housing could be forthcoming as China grapples with cooling exports, escalation in trade war
- Bank of America Merrill Lynch says intensified policy easing is possible in the third quarter
Beijing may begin to unwind restrictions designed to keep property prices in check as it battles to prop up economic momentum amid the escalating trade war, according to experts.
The property sector and related industries, which account for more than 25 per cent of China's gross domestic product according to CLSA, could be used to help offset the deteriorating trade outlook. The policy approach may be winning hearts and minds in Beijing as data showed exports contracted 2.7 per cent in April.
“When one of the three-horse carriages [of the economy] is not performing well, the rest will get more room,” said Mai Fan, chief executive officer of Kaisa Group. “We should take a more active role to contribute more now. After all, bringing in talent and infrastructure, all involve real estate.”
The three pillars of China’s economy are commonly referred to as exports, consumption and investment. Real estate is seen as an important component of investment, with housing sales totalling 13.37 trillion yuan (US$1.93 trillion) in 2017, equivalent to 16.4 per cent of GDP, according to The Handbook of China’s Financial System.
Analysts at Bank of America Merrill Lynch (BAML) said they expect the People’s Bank of China to begin cutting interest rates in quarter-point moves in September and December, followed by one further rate reduction in 2020.
The rate cuts, they say, will come on the heels of similar cuts expected by the Federal Reserve this year designed to shore up the US economy amid a weakening outlook and the sharp declines in US stocks.