China Plans to Buy Idle Land from Property Developers for Affordable Housing
The Chinese government has announced a plan to use regional bonds to purchase idle land from cash-strapped property developers. This land will be used to construct affordable housing, aiming to provide financial relief to struggling developers and make effective use of land.
Current Economic Situation
China’s property sector is experiencing a severe downturn, with new-home sales falling by 22% in the first half of the year. Real estate companies are finding it difficult to start new projects due to financial constraints.
Special-Purpose Bonds
Special-purpose bonds, first introduced in 2015, will be used to fund this initiative. These bonds have previously been used for infrastructure projects and to support small and midsize banks since the COVID-19 pandemic.
Expert Opinions
Naoki Tsukioka of Mizuho Research and Technologies commented that the central government is placing the responsibility of solving structural problems on local governments. He emphasized that without a serious commitment from the central government, such as fiscal stimulus, the real estate sector may not recover.
Potential Risks
There are concerns that if the new affordable housing strategy fails to generate revenue, it could worsen China’s financial situation. The sales of use rights to state-owned land, a key revenue source for local governments, have also declined amid the real estate slump.
Doubts Revealed
China -: China is a large country in East Asia, known for its rich history and being the most populous country in the world.
Idle Land -: Idle land is land that is not being used for any purpose, like farming or building houses.
Property Developers -: Property developers are companies or people who buy land and build houses or buildings on it to sell or rent.
Affordable Housing -: Affordable housing means homes that are priced so that people with lower incomes can afford to buy or rent them.
Regional Bonds -: Regional bonds are a way for local governments to borrow money from investors to pay for projects like building roads or schools.
Severe Downturn -: A severe downturn means a big drop in economic activity, like fewer people buying houses or less money being spent.
New-home Sales -: New-home sales refer to the number of newly built houses that are sold to people.
Financial Relief -: Financial relief means helping someone with money problems, like giving them money or reducing their debts.
Central Government -: The central government is the main government of a country, which makes important decisions for the whole country.