Why is China trying to revive its property sector?

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

Transcript

00:00 For your time, I wonder if you could start with a bit of context.

00:03 How has China got to this position that it essentially needs to shore up

00:07 what's going on in the property sector?

00:09 I think after nearly 12 to 18 months of Chinese policymaker very consistent,

00:17 persistent to introduce policies to help on the demand side, market still felt it's not enough.

00:23 So here you go today, the Central Bank of China is showing the market the bazooka money coming.

00:29 This policy clearly shows the market that when they say they want to help with the market,

00:36 they mean it. Now is the action time. With the policy, particularly interesting is now

00:40 they reduce the down payment for first time home buying, second time home buying. I think

00:45 it's very concrete policy that's literally going to inject a lot of confidence for investors now

00:49 thinking this market will and is going to stabilizing from here.

00:54 Let's talk about this plan from the People's Bank of China unveiling this. It's multi billion

00:59 dollar close on 40 billion US dollar. It's a fund. It's going to be made available to local

01:04 government to buy up some of this property that hasn't sort of materialized as it should. How is

01:11 that going to work? And do you think that's going to go a significant way to solving the property

01:16 crisis? In certain ways, it will, because at some point, most of the state owned enterprise

01:23 wants to buy certain housing properties for their senior executives or even some executives that

01:29 working in different locations to facilitate them and accommodation. It's not a culture

01:34 easily understand in the Western world, but some of the corporates in China do have housing

01:39 themselves to facilitate as such to ease, you know, from one location to another relocation

01:44 of their staffs. So this actually needed in one way. Second, the local government,

01:49 if they step into that help, I think it's more direct for them to know where the issue is and

01:56 more targeted to help on the certain areas and their own cities. This is a second and third,

02:03 I think in this instance, this is actually going to show, you know, central government is dedicating

02:10 the responsibility to the local government to make sure you can deal with your own situation,

02:15 but you have a backup from the central government to support you in such policy.

02:19 China also on Friday announcing the sale of these long term special treasury bonds,

02:25 I think to the value of about $138 billion. I would imagine that's also going to go some way

02:32 to help the Chinese economy, which to a certain extent has been dragged down by what's going on

02:37 in property. How has the market reacted?

02:40 So far, the issuing of the ultra long dated bond happening in China is actually 40s to 90s.

02:47 So it's still happening right now. The duration issued depends on various different years,

02:54 three year, five year, 20 year, 30 year, and even 50 year bonds. So far the take was 100%.

03:00 I saw some news reported on onshore showing some of the bank has allocation certain quota on the

03:07 day they open the branches, people lined up to buy. After the sixth customer in the line to take

03:12 the bonds is finished, the quota is gone. So it's very much highly regarded by the local investors.

03:18 One, Chinese government never default in their history. And now it's slightly higher yield

03:23 with those kind of factor factor in, you definitely attract investors to buy.

03:27 Yes, so some big moves from the Chinese government there. Thank you so much for breaking it down

03:33 for us. That's Shaolin Chen, head of international at Crenshares.