Ex-PBOC Adviser says China’s property market could take as long as a year to recover

Li Daokui is a former member of the People’s Bank of China monetary policy committee from 2010 to 2012. He’s currently director of the Academic Center for Chinese Economic Practice and Thinking at Tsinghua University in Beijing. Was speaking in an interview.

  • Sales in China’s largest cities could return to growth in the next four to six months, but in smaller cities “it will take anything to between six months to one year for a good recovery
  • proposed Beijing create a mechanism to increase bank lending to property developers in order to reduce financial contagion risks
  • about 100 billion yuan ($13.7 billion) will be needed to cushion developers through the current downturn, he estimated
  • “Some developers are overweight in third and fourth tier cities, so their financial situation won’t be able to improve in the coming six months,”
  • “In the meantime, increased lending by commercial banks is still extremely important in order to prevent any propagation of liquidity problems. Some policy has to be in place to stop the shrinking of bank lending.”
  • “When sales recover the lending of commercial banks will be recovered. We’re talking about liquidity support,” Li said. “I’m not saying all developers should survive. What I’m calling for is to stop the panic in financial markets and stop defaults due to slowing sales.”

Sounds like reasonable recommendations if the goal is to slow and perhaps stop contagion. Will anything come of his urgings?

This article was written by Eamonn Sheridan at www.forexlive.com. Source