Editorial | China economy best revived by easing of property restrictions

To revive the economy, China needs to rehabilitate the slumping property market. Having cracked down on real estate to check excess investment and speculation since 2017, authorities are reversing, one by one, key measures that have progressively stifled the market. The latest move has been to shelve the nationwide implementation of a property tax. Dropping the property law, which has been in the works for several years, is seen as a significant concession. It originally aimed at boosting local governments’ tax revenue and helping to narrow the wealth gap. Pilot property taxes were first introduced in Shanghai and Chongqing in 2011 to curb rising house prices and speculation, but the tax sizes were comparatively small. The new draft law would have gone much further. Seen as a “big hammer”, policymakers are wise to drop the legislation for now.

Beijing is now preoccupied with reanimating the public’s property-purchasing potential to help developers and shore up economic growth. News about distressed developers such as Evergrande, Shimao and Country Garden has made international headlines and is casting a pall over investors’ sentiment.

Loan limits for real estate companies – widely known as the “three red lines”, which had pushed many developers to the brink – have been relaxed. Lenders have been allowed to cut mortgage rates and reduce their reserve requirement ratio. Meanwhile, major cities such as Beijing, Guangzhou and Shenzhen have gradually eased restrictions on homebuyers. Other cities have gone further.

Jinan and Qingdao, two of the largest cities in the country’s second-most populous province of Shandong, are the latest to join the easing by lifting all curbs on home purchases and selling. They are following the example of Nanjing in Jiangsu province, Dalian and Shenyang in northeastern Liaoning province, and Jiaxing city, in the eastern province of Zhejiang.

The doom and gloom continues, of course. Latest official data shows new home prices in 70 medium and large cities fell 0.3 per cent month on month in August after a 0.2 per cent drop in July. Even so, talks about recession or even implosion are overblown. The economy is showing signs of stabilising. Sales by developers with state backing remain healthy relative to the general downtrend among private-sector counterparts, while rents are rising. This likely indicates people are delaying buying, but underlying demand remains.