Why Beijing’s “White Lists” Fall Short in Addressing China’s Property Crisis

China’s property crisis has reached a level that Beijing’s efforts to address it fall short. The proposed “white lists” scheme, which designates certain residential property developments for special financing, is seen as too little, too late. While it may bring temporary relief to some homebuyers, it does not tackle the underlying issues plaguing the market.

The “white lists” program calls for local governments to identify failed property developments in their jurisdictions that qualify for special lending by state-owned banks. These banks will then release funds to the approved projects. While this may help complete apartments for pre-paid homebuyers, it does not address the larger problem of developers’ failures.

Since 2021, when Evergrande first announced its financial troubles, more developers have added to the mounting debt in the property sector. Even if the “white lists” were expanded to include more projects, it would only scratch the surface of the hundreds of billions of dollars in questionable debt hanging over China’s financial system.

The scheme also fails to restore confidence among homebuyers, who are reluctant to make purchases amidst declining rates of homebuying. This decline in demand is likely to depress property values further and constrain consumer spending, ultimately affecting the overall economic growth prospects.

Additionally, the “white lists” do not address the legacy of overbuilding that has plagued the property sector. Beijing’s enthusiasm for property development in the past has resulted in a surplus of unoccupied apartments, estimated at 7 million units. With China’s population shrinking, it could take years for these apartments to generate enough cash flow to service the outstanding debt incurred to build them.

While the “white lists” represent a step towards addressing the property crisis, they are far from a comprehensive solution. They do not relieve the debt overhang, overbuilding, and lack of confidence in the market. The rumored government takeover of the property market may temporarily hide the problem but would not solve the underlying issues.

After years of inaction, the “white lists” are a welcome sign of action from Beijing. However, they need to be significantly expanded and accompanied by comprehensive measures to address the property crisis. Without such measures, China’s financial difficulties will continue to hinder economic expansion and growth.

Opinions expressed in this article are those of the author and do not necessarily reflect the views of The Epoch Times.