China shows financial muscle by boosting property market


SHANGHAI — China’s moves to boost its ailing real estate market provide a glimpse of its unrivalled position in coping with the global financial turmoil, analysts said Thursday. The government announced measures to head off a property market crash late Wednesday after figures released this week showed third quarter domestic product growth slowed to nine percent, the lowest growth since mid-2003. “This is big news and the actions came sooner than expected probably because the third-quarter growth was worse than expected and the slowdown has proven sharper than the government expected,” JP Morgan economist Frank Gong said.

With high liquidity, massive foreign exchange reserves and a stable currency, China “has the most flexibility in the world to fend off the impact of the global financial crisis,” Gong wrote in a research note. Propping up the property market, which accounts for 10 percent of China’s gross domestic product, was crucial, analysts agreed. “The direction of the residential property market will determine the direction of the Chinese economy over the next 18 month,” Credit Suisse analyst Dong Tao wrote in a note. “The new measures reflect the rising anxiety about growth risks,” Dong said. Those measures include lifting the stamp tax on property purchases and value-added tax of land on property sales as of November, the finance ministry said. The People’s Bank of China said minimum deposits and mortgage rates for first-time home buyers would be also slashed starting next week. China has already taken other stimulus steps, including cutting its benchmark one-year lending rate by 27 basis points to 6.93 percent two weeks ago. But this week’s economic data provided the most powerful indication yet that even China’s so-far invincible economy was not insulated from the global downturn, especially as fears of recession grow in the United States and Europe — key markets for Chinese manufactured goods. Real estate prices in 70 major Chinese cities fell 0.1 percent in August from July, the first month-on-month price decline since China began releasing the data in July 2005.