Letters | China’s rescue of its property market must not seed the next crash

Readers discuss the need for reform to moderate the cycle of boom and bust, the advantages of the financial hubs of Singapore and Hong Kong, and the role of language teachers in an age of AI

China property

Letters

Published: 11:30am, 18 May 2023

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Is China’s property market destined for a perpetual cycle of boom and bust? As the Chinese government races to rescue its real estate market, it’s essential to consider the long-term consequences of these actions.

The property market faced severe downturns in 2022, with sales by floor area plunging more dramatically than ever before. This was largely due to the government’s crackdown on debt-financed property, a policy that aimed to break China’s addiction to debt. However, the combination of this crackdown and the zero-Covid policy negatively affected the economy, causing gross domestic product last year to grow by a mere 3 per cent.

With the end of the zero-Covid policy, policymakers scrambled to revive the property market. Borrowing limits for developers have been suspended, banks have been ordered to rescue unfinished projects, and local authorities are providing guarantees for developers to raise more debt.

These measures have breathed new life into the market. In February, new home sales among major Chinese developers increased by 14.9 per cent to 461.6 billion yuan (US$66.5 billion) from a year ago.

However, while these efforts may help China’s economy bounce back in the short term, there’s a danger of going too far. Technocrats often respond to crises with liquidity, which can lead to unsustainable debt and overbuilding in the property market. Local governments, driven by the need for revenue from land auctions, also have incentives to maintain high sales volumes.

A rekindling of these forces could be disastrous for the central government, leading to soaring home prices and another build-up of unmanageable debt among developers. The cycle of leverage crackdowns would repeat itself.

Instead of merely addressing the symptoms, China’s leaders should focus on implementing the necessary reforms. For example, a housing tax could curb speculation and generate much-needed income for local governments.

The current property market revival may provide temporary relief, but without genuine reforms, China’s property sector is doomed to repeat its boom-and-bust cycle.

Nicholas To, Kennedy Town

Look to Singapore and Hong Kong amid US banking woes

Investors would usually deposit their funds with banks that offer the most attractive interest rates. They are unlikely to examine the financial soundness of each bank they do business with, as they rely on the central banks to perform supervision, as part of the central banks’ responsibility to safeguard stability and protect consumers.

The collapse of Silicon Valley Bank and Signature Bank as well as the takeover of Credit Suisse by UBS sent shock waves around the world, giving rise to concerns that it could herald another global financial crisis. Not surprising, therefore, that investors have become more apprehensive and are considering more defensive options, including moving their assets to bigger and better managed financial institutions.

The storm clouds over the US banking industry have not completely dissipated, with smaller and medium-sized banks still vulnerable to liquidity and other issues. The seizure and control of First Republic Bank by regulators and the news of the stocks of PacWest Bancorp and Western Alliance Bank falling have heightened the uncertainties.

Despite the Treasury’s assurances that the US banking system is “sound and resilient” and able to weather the economic downturn, investors are still jittery.

Fortunately, the negative news buffeting the banking industries in the West pose no systemic risks to Singapore and Hong Kong because these two are reputable global wealth hubs with a strong regulatory framework and rule of law.

Hence, for investors who are contemplating relationships with banks in a financial centre that has sound regulation, rigorous supervision and effective governance, Singapore and Hong Kong stand out among the competitors.

Tony Lim Kheng Yee, Singapore

Language courses should teach AI literacy

The advent of generative artificial intelligence like ChatGPT may have panicked many language teachers who fear losing their jobs. But in fact, language centres in higher education can capitalise on this trend and adapt to a new role of promoting AI literacy.

AI literacy refers to the ability to assess, interact with and utilise AI technology. Building on this, language centres may adapt their course curriculum in line with the latest research findings.

ChatGPT may now be banned in some places, but once the relevant regulations are in place, it would be difficult to stop people using AI. We should instead help students cultivate their ability to think independently.

Metalinguistic awareness should be one of the key outcomes of future language courses. Critiques of AI text could become routine in language courses. Students could evaluate the passages by using the target language, say English in English classes, to talk about the language of the text, like grammar and tone. They should identify mistakes and fix them.

Meanwhile, we can teach students how to communicate with generative AI by inserting specific prompts to cross-check the accuracy of an AI-generated response. Ultimately, we can ensure students leave the classroom with a skill that cannot be taken over by AI.

Language centres have the responsibility to position our next generation in a world shaped by AI. We can equip our young with AI literacy to grapple with technological challenges – in other words, the power to command robots, rather than the other way round.

Alison Ng, assistant lecturer, Centre for Applied English Studies, University of Hong Kong

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