GT Online: Will the Value of Real Estate Go Up Again in China

Translated by: Ermat

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On January, 19, 2022, China Securities Journal had an article titled, “Central Bank, open the monetary policy toolbox even wider”

The article wrote that Liu Guoqiang, deputy governor of the People’s Bank of China, said that it was important to open the monetary policy toolbox a little wider, keep the aggregate stable and avoid credit collapse. It makes three main points, one is to make sufficient efforts to open the monetary policy toolbox wider, keep the total amount stable and avoid credit collapse. What he means is to find ways to lend out more loans. As long as you have the demand and the procedures are compliant, we will certainly release the loan to you. Second, the precision of the force, the financial sector not only to welcome customers to the door, but also to take the initiative to find good projects, do effective addition, optimize the economic structure.

 The actual fact is that some people will take advantage of this to get these loans to the property? With the Chinese personality, it is estimated that more than 90 percent will be so. Third, to look forward and respond to the general concerns of the market in a timely manner. He means that time is limited, the United Statesis going to raise interest rates. We need to grab the external environment to change before the rush to release water, otherwise after it is difficult. Because it is now widely predicted that the United States will begin to raise interest rates in March to fight inflation, and in 2022 it will raise interest rates several times.

The role of the Federal Reserve is  equivalent to the world’s central bank. In the context of the Fed’s interest rate hike, the challenge for all emerging market countries, including China, is the pressure of capital outflows. Generally speaking, when the return on capital investment in emerging economies is high, capital enters in various guises and participates in investment. However, once the U.S. raises interest rates and the interest rate on the U.S. dollar increases, these investments begin to exit the emerging economies, including China, of course, and flow back to the U.S. In the premise of capital flowing back to the U.S., the result will be a fall in asset prices and a crisis. This logic has been repeated over the past few decades. Some of the so-called Internet and certain enterprises and many private lending enterprises may also be pumped, leading to a break in the capital chain or even bankruptcy.

More than 80% of the jobs in the country are provided by these small businesses. This year, many of these small businesses can not hold up. If these small businesses are finished, employment will be in danger. Furthermore, if the property market is not well cushioned, China’s property market will collapse. So now, in order to give the property market a good cushion, the central bank will release water, so that the property market will not get a big crash. The second is to fight deflation, but no matter how to release water now, the bottom of the people can not receive it. Small and medium-sized enterprises can get a little on the good side. All the time the big release of water was cut off by the upper layer. Now the lower and middle classes are wailing, while the upper classes are getting more and more money.

According to the latest report of Yankee Business Network, Nanjing Deji Plaza has an annual turnover of over 20 billion in 2021, up 30% from 2020, and it is the only single full-service high-end shopping center in Nanjing with an annual turnover of over 20 billion. Now the typical domestic market is that the rich have more money than they have room to spend, and the poor want to spend money, but no money in their pockets. In the past two years, the global epidemic has been raging. Nanjing is also a city that has experienced the epidemic, but the luxury goods sales in Nanjing still hit a new high, isn’t it magic? In other words, the rich are getting richer and richer, and every time the money is released into their pockets, they are desperately trying to buy, while the poor are on the verge of breaking their mortgage.

Although the central bank is meant to add a cushion to the property market, or to prevent small and medium-sized enterprises from breaking their capital chains. But in the end, just like the results of previous releases, the money will rarely enter small and medium enterprises who have the urgent need for money, most of the money will be given to those who have connections and power. After they get the money, they have two options, one is to move abroad. It is expected that Xi Jinping will strictly control the transfer of funds. But this can not control these powerful people because the global banks are controlled by them. But those who are not powerful enough for that level are subject to some restrictions. They will put their money back into the property market. 

So certain high-end properties in good locations are likely to go up significantly. And for the average poor person, even if they are given a loan, now they don’t dare to ask for it because they don’t know if they will have a job tomorrow and if they can still pay back the bank loan. Now the lower and middle class people are worried about the stability of their jobs, the stability of their income. So for the lower middle class people, even if they are given a loan they are afraid to take it for fear of not being able to pay it back. So the price of low and middle class properties will not go up and will not be affected by this big release. This release will intensify the division of the property market.



Disclaimer: This article only represents the author’s view. Gnews is not responsible for any legal risks.

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