China is finally giving up on bailing out its property sector as its government body said during the press conference along with the annual parliamentary meeting on Saturday that troubled developers will have to go bankrupt, which underlined Beijing’s earlier plan to prioritize manufacturing, education and consumption.
According to the translated transcript from the conference, the Minister of Housing and Urban-Rural Development said that real estate companies that are unable to pay debt or have lost their ability to operate the business, which implies bankruptcy, should go bankrupt in accordance with the law.
The comment came after the property sector in China has been facing a liquidity crunch as giant developers like Evergrande and Country Garden defaulted on their debt, while plunging home sales cause capital flows for home developers to be even tighter.
The IMF said last month that it expected demand for new housing in China to fall by around 35-55% over the next decade, which would make it hard for the government to revive its overall economy with the property still dragging growth that once accounted for 25% of China’s GDP.
The topic of the property sector barely came up during this year’s annual meeting, but details from the parliamentary gathering showed that the government would put manufacturing and domestic technology as its main focus this year. Education came in second and support for consumption came in third. This could put the property sector at fourth on the list at best.
Premier Li Qiang set a target for 2024 growth at 5%, the same level as last year’s estimate. However, to achieve that growth is no easy task. Economists and analysts added that Beijing would need much more stimulus this year if it wants to achieve that same level.
