Why is China trying to revive its property sector?

CGTN Europe

CGTN Europe spoke to Xiaolin Chen, Head of International, KraneShares

Transcript

00:00 All right, Shaolin Chen is head of international at Crenshes. Joining us now, thank you so

00:06 much for your time. I wonder if you could start with a bit of context. How has China

00:11 got to this position that it essentially needs to shore up what's going on in the property

00:15 sector? I think after nearly 12 to 18 months of Chinese

00:22 policymaker very consistent, persistent to introduce policies to help on the demand side,

00:29 they still feel it's not enough. So here we go today. The Central Bank of China is showing

00:34 the market the bazooka money coming. This policy clearly shows the market that when

00:40 they say they want to help with the market, they mean it. Now is the action time. With

00:45 the policy, particularly interesting is now they reduce the down payment for first time

00:50 home buying, second time home buying. I think it's very concrete policy that's literally

00:54 going to inject a lot of confidence for investors now thinking this market will and is going

00:59 to stabilizing from here. Let's talk about this plan from the People's

01:03 Bank of China unveiling this. It's multi-billion dollar, close on 40 billion US dollar. It's

01:08 a fund. It's going to be made available to local government to buy up some of this property

01:14 that hasn't sort of materialized as it should. How is that going to work? And do you think

01:19 that's going to go a significant way to solving the property crisis?

01:26 In certain ways, it will. Because at some point, most of the state-owned enterprise

01:30 wants to buy certain housing properties for their senior executives or even some executives

01:35 that are working in different locations to facilitate them and accommodation. It's not

01:40 a culture easily understood in the Western world, but some of the corporates in China

01:45 do have housing themselves to facilitate as such, to ease from one location to another

01:50 relocation of their staffs. So this is actually needed in one way.

01:54 Second, the local government, if they step into such help, I think it's more direct for

02:00 them to know where the issue is and more targeted to help on the certain areas and their own

02:07 cities. This is a second. And third, I think in this instance, this is actually going to

02:13 show central government is dedicating the responsibility to the local government to

02:20 make sure you can deal with your own situation, but you have a backup from the central government

02:24 to support you in such policy.

02:27 China also on Friday announcing the sale of these long-term special treasury bonds, I

02:32 think to the value of about $138 billion. I would imagine that's also going to go some

02:38 way to help the Chinese economy, which to a certain extent has been dragged down by

02:43 what's going on in property. How has the market reacted?

02:48 So far, the issuing of the ultra long dated bonds happening in China is actually 14th

02:54 to 19th. So it's still happening right now. The duration issued depends on various different

03:01 years, three year, five year, 20 year, 30 year, and eventually 50 year bonds. So far

03:06 the take was 100%. I saw some news reported on onshore showing some of the bank has allocation

03:13 certain quota on the day they open the branches, people lined up to buy. After the sixth customer

03:18 in the line to take the bonds is finished and quota is gone. So it's very much highly

03:23 regarded by the local investors. One, Chinese government never default in their history.

03:28 And now it's slightly higher yield with those kind of factor, factor in, you definitely

03:33 attract investors to buy.

03:34 Yes, so some big moves from the Chinese government there. Thank you so much for breaking it down

03:40 for us. That's a Shaolin Chen, head of international at Crenshares.

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