Is China preparing an XXL real estate bailout plan?

Is China preparing an XXL real estate bailout plan?
Is China preparing an XXL real estate bailout plan?

China is reportedly planning a plan for the country’s local governments to buy millions of unsold homes, Bloomberg reported Wednesday evening, as a prolonged housing crisis weighs heavily on the world’s second-largest economy. An announcement which helped the Chinese continental CSI 300 index to advance by 2%.

The State Council is collecting reactions from provinces and government bodies on the preliminary plan, according to information obtained from people familiar with the matter. The article said local public companies would be asked to contribute to the purchase of unsold housing from struggling developers, at deep discounts, using loans provided by public banks, adding that a large number of these homes would then be converted into affordable housing.

Chinese authorities are currently debating the details and feasibility of the plan, and its finalization could take months, if the country’s leaders decide to move forward, Bloomberg points out.

A sector in disarray

The Chinese real estate sector has been in the doldrums for years. Since 2022, waves of policy measures have failed to turn around a part of the economy that represents a fifth of the country’s gross domestic product (GDP) and remains a major drag on consumer spending and confidence.

Estimates vary widely, but analysts agree there are tens of millions of unfinished apartments across China, after a construction boom turned bust.

Banks have been reluctant to heed Beijing’s repeated calls to increase credit to the struggling sector, given the risks of rising bad loans.

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