SGH Insight
As might be expected, Premier Li also said at the meeting that stabilizing the real estate sector is one of the priorities of governments at all levels for H2 2023.
The State Council has solicited ideas from megacities such as Shanghai and Beijing. As both cities reported double-digit growth in real estate investment and new home sales in H1, the State Council will not adopt a national real estate stimulus policy, but will rather support first, second, and third tier city efforts to improve city-specific policies according to individual situations.
In order to support the real estate sector in super-large and mega cities, the State Council also just ordered all 21 of these cities to promote the construction of both “Emergency and Dual Use” facilities in H2 2023, recreational facilities that can be used also in case of pandemic and emergencies. The State Council also ordered all 21 super-large and mega cities with a population greater than 5 million to speed up the transformation of the lower income “cities within cities,” to ensure the stability of the national real estate industry in H2 2023...
...Going straight to the numbers, fiscal spending for H2 was bumped up from the original budget and is targeted to increase by just under 7%, 6.9% to be precise, from H1 spending.
In H1 2023 China’s fiscal spending rose 3.9% over the same period last year, to 13.39 trillion yuan. This 13.39 trillion-yuan figure, comprised of 1.67 trillion in central government spending and 11.72 in local government spending, represents 48.7% of the total 27.51 trillion yuan allocated for 2023, leaving 14.12 trillion yuan for H2 spending.
Thursday’s CFEAC meeting approved an additional allocation of 200 billion yuan to H2 2023 spending, to bring the total spending for H2 to 14.32 trillion yuan, about 7% higher than fiscal expenditures for H1. The extra 200 billion yuan also symbolically bumps year-on-year comps by more than 1 trillion above the 13.17 trillion that was spent in H2 of 2022, by 1.15 trillion to be precise.
The CFEAC predicts that these levels of spending will pull China’s H2 GDP growth into the 5.3-5.5% range.
The additional 200 billion yuan will be allocated as follows: 11.5 billion to subsidize targeted semiconductor and artificial intelligence enterprises, 52.5 billion to advance the “transformation of villages in super-large and mega cities,” essentially urban slums, 55 billion to spur the private economy, and 81 billion towards stimulating consumption. Local governments are urged to encourage more nongovernmental investments, including in integrated circuits, new materials, and next-generation information technology.
The CFEAC meeting stressed that fiscal policy should also be used to extend the duration of temporary policies such as value-added tax relief for micro and small-scale taxpayers.
Premier Li Qiang pledged an additional 46.5 billion yuan towards meeting the country’s “Made in China 2025” high tech objectives, of which 35 billion yuan will come from the secretive “Premier Fund.”
As might be expected, Premier Li also said at the meeting that stabilizing the real estate sector is one of the priorities of governments at all levels for H2 2023.
Market Validation
Bloomberg 7/28/23
China Vice Premier He Lifeng urged the country’s mega cities to actively advance the urban villages redevelopment in an effort to boost domestic demand, Xinhua News Agency reports citing a conference held in Beijing on Friday.
• He called for improving the living conditions of urban villages residents and to strengthen real estate structure
• He also noted the difficulties for urban villages redevelopment at the moment and urged to explore new ideas to solve complex issues like use of funds, land resumption and how to resettle people and industries
MT Newswires 7/25/23
Chinese Shares Rebound on Beijing's Pledge to Support Real
Chinese shares staged a recovery on Tuesday as Chinese top leaders pledged to provide further assistance to the property market, while also focusing on boosting consumer spending and tackling local government debt during a Politburo meeting.
The Shanghai Composite Index, the main gauge of Chinese stocks, rose 2.1%, or 67.36 points, to 3,231.52, marking an end to a three-day downturn. The Shenzhen Component Index climbed 1.4%, or 148.99 yuan, at 11,021.29, after enduring a seven-day rout.
The positive shift in sentiment followed the assurance from Chinese politicians to implement macroeconomic adjustments, strengthen domestic demand, and promptly optimize property policies.
During the meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee, emphasis was placed on maintaining a proactive fiscal policy and a prudent monetary policy. Additionally, measures were discussed to extend, optimize, and ensure the implementation of tax and fee reductions, Xinhua News Agency reported.
The leaders also underscored the importance of promoting stable and sustainable development in the real estate market through concrete efforts.