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China Uses Public Debt to Acquire Unused Land for Affordable Housing
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The Chinese government plans to purchase unused land from struggling developers using regional bonds with the aim of constructing affordable housing. Special-purpose bonds, introduced in 2015, are used to fund infrastructure and now also land acquisitions.
Sales of new homes declined by 22% in the first half of 2024. Many developers are cash-strapped and unable to initiate new projects. The government's objective is to assist these developers and optimize the use of land.
In May, a lending program was announced to purchase unsold homes, but the progress has been slow. The new plan could put pressure on local government finances if the affordable housing does not generate sufficient revenue.
Special-purpose bonds also support troubled banks. Their balance has tripled since 2019 to 26.1 trillion yuan. Land sales, a significant source of income for local governments, have decreased by 33% from their 2021 peak.
Naoki Tsukioka of Mizuho Research & Technologies observes that the central government is transferring responsibility to local governments. Without substantial fiscal stimulus from the central government, the real estate sector may continue to face challenges.
| Scores | Value | Explanation |
|---|---|---|
| Objectivity | 6 | Comprehensive reporting with in-depth analysis. |
| Social Impact | 4 | Strong social discussion, influencing some public opinion. |
| Credibility | 5 | Solid evidence from authoritative sources. |
| Potential | 5 | Very high potential to trigger significant changes. |
| Practicality | 4 | Highly practical, directly applicable. |
| Entertainment Value | 2 | Slightly monotonous with a few entertaining elements. |