Government/Politics - 13. page

At the opening ceremony of the Special Forum on Promoting the High-Quality Development of Finance for Provincial and Ministerial-Level Leading Cadres, Xi Jinping emphasized the need to “focus on preventing and resolving financial risks, especially systemic risks” and said that the Chinese government should regulate and monitor the financial industry “with teeth and thorns.”

People’s Daily followed up by publishing an article that argued for establishing a “comprehensive and effective financial regulatory system.”

The article said that “safeguarding financial security is a strategic and fundamental matter that concerns the overall development of China’s economy and society.”

“There are still many hidden economic and financial risks in China, such as low efficiency in financial services to support the real economy, irregularities and corruption in the financial industry, and weak financial regulatory and governance capabilities. The 20th National Congress of the Commuinst Party called to ‘strengthen and improve modern financial regulation, enhance the financial stability guarantee system, bring all types of financial activities under supervision, and guard against systemic risks.'”

Source: People’s Daily, January 20, 2024
http://opinion.people.com.cn/n1/2024/0120/c1003-40162853.html

China’s stock market performed poorly in 2023. To help buoy the stock market, Beijing has increased its efforts to “introduce mid-to-long-term into the market.”

People’s Daily reported that Lin Xiaozheng, Deputy Director of the Department of Supervision of Securities and Fund Institutions at China’s Securities Regulatory Commission (CSRC), stated at a press conference that the CSRC will make greater efforts to introduce more mid-to-long-term funds into the market. Lin mentioned that, in recent years, “the CSRC has vigorously developed equity funds and actively promoted various mid-to-long-term funds’ participation in the capital market, achieving phased results. As of the end of 2023, various professional institutional investors, including social security funds, public funds, insurance funds, and pension funds, collectively held 15.9 trillion yuan of A-shares [in the Chinese stock market], doubling the amount held in early 2019. Their stock ownership ratio increases from 17% to 23%. These institutions have become a significant force in promoting the stable and healthy development of the capital market. Among them, public funds held 5.1 trillion yuan of A-shares, and stock ownership ratio increased from 3.8% to 7.3%, making them the largest professional institutional investor in A-shares.”

Source: People’s Daily, January 13, 2024
http://finance.people.com.cn/n1/2024/0113/c1004-40158192.html

A video of Huang Qifan has been circulating in China, generating some heated discussion. Huang expressed his view that the Chinese government should buy up residential housing following a potential drop in real estate prices. Huang is the former mayor of Chongqing and former Vice Chairman of the Financial and Economic Committee of China’s National People’s Congress.

Recently, the Chinese government suggested splitting residential housing into two categories: Commercial Housing, which people would be allowed to buy and sell, and Government Subsidized Housing, which would be owned by the government. This latter category, ineligible for purchase or sale by the public, would be leased out by the government to people in financial need.

In the video of Huang, he stated that housing prices in China have already fallen 10 to 20 percent over the past couple of years. If prices were to fall another 30 percent this year then the total drop in price would be 40 to 50 percent down from the peak. When this happens, he said, the government could “take the opportunity” to buy up these apartments. Cities could use 5 trillion yuan (US$ 700 billion) to buy up such apartments and then lease them out as the Government Subsidized Housing. He said that housing prices would then rise back up over the subsequent five to ten years, and this would be an excellent way for the government to “save the housing market.” He argued that the government would not lose any money (it would actually make money), and it would avoid needing to spend money on building out Government Subsidized Housing.

Huang went on to argue that there is no moral problem with his proposed plan of action. In his analysis, the proposed approach has many benefits: it “solves the supply of the Government Subsidized Housing,” saves the real estate market, resolves extra housing capacity (i.e. reduces oversupply of housing), saves real estate companies and banks, and “balances social debts.”

Huang also proposed an approach for bringing down housing prices in China: by tightening the money supply and loan activity, the government could cause many house foreclosures. When the share of foreclosed housing reaches a certain proportion, housing prices in the market more broadly would fall.

An article on the Aboluo  website criticized Huang’s argument. The article reasoned that the “base housing price” from five years ago was 50 percent of recent peak in housing prices, and that the general public had benefited greatly from this rise in real estate asset prices. If the government were to let housing prices fall by 50 percent, the public (which is heavily invested in real estate) would take a big monetary loss. Following Huang’s plan, the government would then buy the housing at the base price (a 50 percent discount from peak prices) and would reap financial gains after waiting for another five years to pass, seeing their investment double in value. The Aboluo article argued that those investment gains should belong to the general public, not to the government — by following Huang’s plan, the government would not be “expanding the pie” of the housing market, but would rather be cutting the pie in half and taking half for itself.

Source: Aboluo, January 8, 2024
https://www.aboluowang.com/2024/0108/2001131.html#google_vignette