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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Canuck Dave who wrote (71083)	2/17/2011 9:47:28 PM
From: TobagoJack	Respond to of 218585

following up, just in in-tray, per stratfor China's Moves to Toughen Property Policy February 17, 2011 \| 1740 GMT PHILIPPE LOPEZ/AFP/Getty Images High-rise residential buildings in Shanghai, China Summary Beijing Municipality has announced several new regulations aimed at deterring price inflation in its property market. While these new regulations should slow price rises and reduce property sales — representing a hardening of the Chinese government’s stance in its fight against inflation — it is unclear just how strict their enforcement will be. Officials thus far have preferred to attempt to maintain stability ahead of a 2012 leadership transition, and the tougher the regulations, the greater the risks to economic growth, the fiscal health of the local government and the overall financial system. Analysis Beijing Municipality on Feb. 16 posted a long list of new regulations on the property market in an effort to deter price inflation in the hardest-hit market in China, which is suffering from real estate price hikes across the country. These regulations could represent steps toward slowing property price hikes and sales. However, the importance of real estate to China’s economy means that taking too tough a stance risks negative impacts on the rest of the country’s financial system. China’s policymakers continue to struggle with inflation. The People’s Bank of China on Feb. 17 released a new statistic called “total social financing,” which combines all the new credit supplied to the economy (rather than merely new bank loans). It reveals that in 2010, total new credit reached 14.27 trillion yuan ($2 trillion), higher than the 12 trillion yuan previously estimated and far higher than the 7.95 trillion yuan in new bank loans. With 2011 likely to be the third consecutive year of such extraordinary credit infusion — at least a quarter of which flows into property — inflation remains China’s dominant economic problem. The most important element of Beijing’s new rules requires that non-residents cannot buy new apartments. Registered Beijing families will be restricted to two apartments and will be prohibited from further purchases if they already own more than two. The rules are also expected, among other things, to boost Beijing’s allocations of land for cheap, state-subsidized housing to increase supply and ease price rises. Beijing’s regulations, if enforced, will have a greater immediate impact than the property taxes introduced on a trial basis in Shanghai and Chongqing earlier this year, which have a narrow scope (though the implications of a tough, nationwide property tax in the long run are vast). The regulations are not anticipated to send prices into outright decline, but they are expected to slow rises and cut down on property sales. Chinese authorities say a second wave of regulations, after the ineffective measures of 2010, is being adopted across the country, this time targeting not only major cities such as Beijing but also second- and third-tier cities. STRATFOR sources in Beijing believe that after extensive debate in recent months, policymakers are hardening their stance and that property measures will now become more forceful. Because property prices have become a popular symbol of the vast disparity in wealth, they have taken on political significance as well, and this is allegedly driving the newest round of property tightening (with Chongqing being the premier example). Examples of this politicization include a recent adjustment to the official inflation measure and the National Bureau of Statistics’ decision to stop publishing the national property prices index, which leave the future transparency of consumer and property prices even darker than before. According to sources, the central government feels confident to plan for tightening for the next two years before launching a expansion in 2013 to kick off China’s new administration. But this decision cannot be irrevocable; with a power transition looming, the outgoing leaders want to end on a high note of growth, while the incoming leaders do not want to inherit an unbridled overheating economy or to start off their term with austerity. Moreover, policymakers tend to respond to changing circumstances, with an eye toward maintaining stability. China’s getting tougher on property prices would heighten the risks to overall economic growth and to the financial system. Should authorities overcorrect, prices could fall, weakening one of the pillars of China’s economic growth and possibly causing a chain reaction of plummeting prices. Falling prices and a softening market would also hurt local governments, which depend on land sales to generate, on average, about 50 percent of their revenues. Falling revenues would leave local governments scrambling to finance their ongoing borrowing, possibly failing to provide essential services. This in turn would impact the populace, as well as local government financing platforms and the banks that have lent the most to them, igniting financial powderkegs. The question, then, is how tough the central government’s tougher stance will really be.