China's Housing Sector Faces Challenges Despite Possible Rescue Measures

China's housing sector is facing ongoing challenges despite possible rescue measures. The sector has implemented reforms including changes in financing, presale, and property tax.

Additionally, 300 billion yuan has been allocated to address excess inventory. However, weak demand, falling prices, and a 4.7% Q2 GDP growth, along with Goldman's GDP contribution cut, indicate the difficulties the sector is facing.

The impact of these challenges on the real economy may take years to fully manifest. China's central bank has also taken measures to combat the economic slowdown by cutting key rates to record lows.

However, these monetary policies alone may not be sufficient to address the crisis in the housing sector. The sector's struggles are further exacerbated by high levels of debt in local governments and the fact that the previous construction boom was fueled by borrowing.

In addition, China's Third Plenum has announced reforms aimed at reducing systemic risks related to real estate, local debt, and financial issues. However, experts believe that these measures are unlikely to fully solve China's entrenched economic challenges.

The country's large production capacity, weak domestic demand, and rising global protectionism also pose additional obstacles to economic recovery. China's rural land reform, on the other hand, is seen as a potential solution to address the rural-urban income gap and support the goal of common prosperity.

The reform allows farmers to commercially utilize their homes through renting, shareholding, and cooperation, which helps in boosting their incomes. It also aims to integrate migrant workers by safeguarding their rural property rights.

The implementation of the reform will require legislation to break down restrictions on using rural property as collateral for loans and allow commercial use of homes owned by village collectives to support urbanization.