China’s massive property market is crumbling. Xi Jinping wants to revive socialist ideas about housing and put the state back in charge.
Under the new strategy, the Communist Party would take over a larger share of the market, which for years has been dominated by the private sector. Underpinning it are two major programs, according to policy advisers involved in the discussions and recent government announcements.
One involves the state buying up distressed private-market projects and converting them into homes that the government would rent out or, in some cases, sell. The other calls for the state itself to build more subsidized housing for low- and middle-income families.
The goal, the policy advisers say, is to increase the share of housing built by the state for low-cost rental or sale under restricted conditions to at least 30% of China’s housing stock, from 5% or so today.
Beijing’s economic mandarins, led by Xi’s top economic-policy aide, Vice Premier He Lifeng, are still hammering out how to execute the real-estate strategy. Economists caution that the plan could take years to achieve—if it’s achievable at all.
The cost would be huge: potentially up to $280 billion a year for the next five years, or a total of around $1.4 trillion, according to some analysts.
Whether China wants to pay that tab—or even can—is a central question. Local governments in China are already burdened with colossal debt, and it’s unclear whether Beijing will be willing to bear the brunt of the funding burden.
Beijing has repeatedly disappointed analysts and investors over the past couple of years with insufficient or poorly executed measures to stimulate growth and clean up the housing mess. People who have examined some of the government’s plans say the strategy is also filled with complexities and contradictory aims that could make it difficult to fully implement successfully.
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