gao shanwen: china's real estate market needs to complete three major transitions, and the supply side needs more powerful support measures
2024-09-08
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"economic transformation is like driving on a highway. sometimes you have to turn, and this turn is equivalent to economic transformation. you have to slow down when turning on the highway. if you continue to maintain a very high speed, it is unsafe and you may not be able to turn. although you have to slow down when turning, if the speed is too low, it will cause many problems."
on september 7, at the 6th bund financial summit, gao shanwen, chief economist of sdic securities, cited the example of this highway turn and analyzed two different diagnoses and policy recommendations for the current situation of insufficient total demand in the domestic economy.
he mentioned that in the face of insufficient total demand in the domestic economy, there are two different views in the market. one view is that the current insufficient total demand is the price of transformation and the trouble of growth. the economy must shift from the growth driven by machinery (manufacturing) and real estate in the past to high-quality growth driven by high-end manufacturing and modern service industries. in the process of transformation, it is inevitable to experience a period of pain and a relatively slow growth. this view believes that the current situation is the inevitable price to be paid in the process of transformation and is a reality that must be faced.
another view is that the current total demand is insufficient, the overall price level and re-employment pressure, especially the employment pressure of young people and college students, are prominent. from the perspective of total demand management, the top priority is to stimulate and stabilize total demand as soon as possible, so that the overall price level can return to a satisfactory level as soon as possible, and the employment rate and unemployment rate can return to a relatively normal range. the management of short-term total demand fluctuations can be separated from the structural transformation of the economy.
gao shanwen believes that the above dispute is more of a philosophical and economic dispute, stemming from differences in methods and beliefs. "the current situation of insufficient aggregate demand is obviously related to economic transformation. in the process of transformation, is our speed just right, or is it still too low relative to the demand for transformation?" he believes that this issue requires observation of more extensive evidence and conclusions, especially since the second quarter of this year, domestic consumers have seen a relatively large slowdown in their spending. these evidence and changes deserve further reflection.
talking about the much-discussed real estate issue, gao shanwen believes that the adjustment of real estate in the past two years has been a very critical factor affecting my country's economy. as for whether the adjustment of china's real estate market is the same as that of japan's real estate market in the late 1980s, he believes that there are similarities, but also special features at multiple levels.
from the demand side, the demand in the real estate market has been declining in recent years, especially in the new home market. consumers have become more conservative in their consumption behavior and asset allocation behavior (including real estate allocation behavior). this impact has continued to this day and has undoubtedly exacerbated the adjustment of the real estate market.
"but despite this, i believe that the adjustment of china's real estate market is very special on several levels and is different from the typical real estate bubble burst in other countries." gao shanwen emphasized that china's real estate market is undergoing three huge challenges and adjustments: first, from the high-turnover model before 2021 to the future manufacturing model; second, from the previous large group companies that were legally independent legal entities managing numerous projects and uniformly allocating funds and coordinating liquidity, to the future transition to funds and liquidity management centered on the projects of a single independent legal entity; third, from the past pre-sale system (accounting for nearly 90%) to the future model that is largely based on sales of existing homes.
gao shanwen believes that the three transformations and transitions that china's real estate industry is experiencing have brought huge challenges to real estate companies. among them, the most prominent challenge in the short term is the pressure on the capital level, which is reflected in both debt financing and equity financing.
"but corresponding to the pressure on funds, all kinds of financial institutions have generally reduced their risk exposure to real estate companies in the past few years." he said that to complete such a huge transition, real estate companies need a huge amount of funds, including debt financing and equity financing, but the financial system is still reducing the supply of funds to real estate companies. this contradiction makes it difficult for real estate companies to adjust smoothly. combined with a series of problems on the demand side, the real estate industry is in trouble.
he further pointed out that the emergence and continuation of the above-mentioned difficulties in the real estate industry has also become one of the very fundamental reasons for the growth rate being lower than expected, weak demand and local fiscal difficulties during the economic transformation and adjustment process.
from the third to the fourth quarter of this year, the risk of further weakening total demand may still be the dominant risk in the domestic economy. looking ahead, gao shanwen believes that adjusting the real estate market by stimulating residential demand and lowering loan interest rates is effective, but to help real estate companies complete the huge transition in the above three aspects, it may be more important to take more powerful and targeted measures on the supply side.
in addition, at the level of broad consumption, gao shanwen mentioned, in conjunction with the current highly-discussed topics of overcapacity and trade pressure, that china, as the world's largest manufacturing country, has a manufacturing output that is almost equal to the combined output of the seven major industrial countries. this means that fluctuations in china's total demand and total supply will have spillover effects. therefore, it is necessary to adopt more global ideas and practices in industrial policy, macroeconomics and tax management.
he stressed: "although the transformation of the economy to high-end manufacturing is very important, and it is increasingly important for the economy to rely more and more on tfp and total factor productivity, the ultimate goal of all economic activities is to enable people and consumers to live a better life. people's desire for a better life and greater consumption are the ultimate driving force of economic activities. therefore, consumption activities should be the ultimate goal of all economic activities. our policies to stimulate consumption need further in-depth thinking."
(this article comes from china business network)
