"The PBoC Props Up China’s Housing Market" By CWP Alum Zongyuan Zoe Liu

A healthy housing market is critical to China’s economic growth and financial stability, but slowing home sales, driven by pandemic restrictions and demographic shifts, has unsettled both real estate developers and home buyers. The People’s Bank of China (PBoC) has responded by lowering mortgage interest rates, which has contributed to the fragmentation of the Chinese housing market across different tiers of cities. 

China’s housing market shares similarities with those in other countries, but its unique historical circumstances have resulted in notable distinctions. Housing reform has been a central aspect of China’s reform and opening up, with the PBoC playing a crucial role in guiding the development of the housing market from the outset. During the first decades of the People’s Republic of China, a person’s home was not considered a private asset. That changed in April 1980, when Deng Xiaoping introduced reforms that allowed individuals to purchase homes for the first time with the option of taking out a mortgage loan. The current structure of the Chinese housing market dates back to 1998, when Premier Zhu Rongji declared the commercialization of all housing, putting an end to the socialist welfare housing system in China. That same year, the PBoC encouraged commercial banks to allocate up to 15 percent of new loans to mortgages.

Blog Post by Zongyuan Zoe Liu and Daniel Stemp - March 21, 2023 10:01 am (EST) - 

Zongyuan Zoe Liu is a fellow for international political economy at the Council on Foreign Relations (CFR). Her work focuses on international political economy, global financial markets, sovereign wealth funds, supply chains of critical minerals, development finance, emerging markets, energy and climate change policy, and East Asia-Middle East relations. Dr. Liu’s regional expertise is in East Asia, specifically China and Japan, and the Middle East, specifically Gulf Cooperation Council countries. Dr. Liu is the author of Can BRICS De-dollarize the Global Financial System? (Cambridge University Press) and Sovereign Funds: How the Communist Party of China Finances its Global Ambitions (Harvard University Press, forthcoming 2023).

Photo Credit: https://pixabay.com/users/paul_henri-6735189/