China’s city governments test Beijing’s cautious policymakers by overturning rules to revive floundering housing market

Fuzhou in southern Fujian province follows Zhengzhou, Harbin and other cities in overturning old rules to revive home sales

Beijing’s ‘three red lines’ policy and Covid-19 lockdowns have combined to squeeze developers and pushed homebuyers to the sidelines

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Big developers like Sunac China are struggling to repay creditors as home sales dry up. Photo: Bloomberg

Published: 2:00pm, 5 Apr 2022

China’s local government authorities are slowly ripping up old restrictive rules to revive a floundering property market, testing the resolve of policymakers in Beijing who have been reluctant to reverse its market-tightening policy.

Fuzhou, the capital of southern Fujian province, last week started allowing non-locals to buy homes in the city without providing any proof of mandatory residency or pension fund as security, a departure from regulatory norms. Quzhou, in eastern Zhejiang province, last week lifted curbs on buying and selling.

The move mirrors similar measures across several mainland cities including Zhengzhou in central Henan province and Harbin in northernmost Heilongjiang province as local officials look for ways to replenish their depleted finances and fund projects to meet economic growth targets.

China imposed the “three red lines” measures, starting in August 2020 to control systemic risk posed by weak developers, sending the industry into a slump not seen since the 2015 stock market crash. Contracted sales at the nation’s top 100 developers slumped 47 per cent in the first quarter from a year earlier, as rising cases of debt defaults kept buyers on the sidelines, according to industry data.

“After Zhengzhou and Harbin issued large-scale loosening measures, we did not see any sign of official resistance, suggesting the central government was not opposed to them,” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute. “So we will see more cities, especially those with dormant home sales, follow in their footsteps.”