Chinese and Hong Kong stock markets gave up early gains to end sharply lower on Thursday (Oct. 17) after China announced supportive measures to prop up the country’s flagging property sector, albeit on a small scale.
The CSI 300 real estate index — which had gained over 5% on Wednesday — fell nearly 8%, while the benchmark CSI 300 declined 1.13% to 3,788.22. Hong Kong’s Hang Seng closed down 1.2% while the Hang Seng Mainland Properties Index dropped 6.6%.
The measures included expanding a “white list” of housing projects eligible for financing and increasing bank lending for such developments to 4 trillion yuan ($561 billion) by the end of 2024, up from 2.23 trillion yuan currently. The briefing from China’s Ministry of Housing and Urban-Rural Development lacked substantial new measures, leaving investors skeptical regarding further economic growth ahead of third-quarter GDP data due on Friday (Oct.18).
The briefing is the latest in a series of high-profile briefings from the Chinese government, which began in late-September, as Beijing began rolling out more supportive measures for the economy.
The ailing real estate sector is widely believed to lie at the root of China’s numerous economic woes. The sector once accounted for as much as 30% of economic activity. Currently, it makes up about a quarter of the Chinese economy and 70% of household wealth.
China’s central bank on Thursday said it is considering measures to incentivize property ownership. It may allow policy banks and commercial lenders to provide loans to property developers to buy land, and could tap relending facilities to offer banks these loans, said Tao Ling, a vice governor at the People’s Bank of China. In late September, the central bank announced measures including cuts in the minimum down payment ratio to 15% for all buyers.
Chinese authorities also plan to renovate one million apartments in so-called urban shantytowns, a strategy used during the prior real-estate slump. The real estate sector’s recovery is vital for overall economic stability and growth.