China’s new property measures don’t address the fundamental contradiction

CHINA FINANCIAL - Report 15 Nov 2022 by Michael Pettis

Special points to highlight in this issue:

* The trade and debt data releases last week, along with today’s economic data, indicate that there has been no change in October in the deterioration in the quality of Chinese growth. In fact the consumption share of growth declined in October even more than anyone expected.

* The market has nonetheless reacted very positively to two sets of plans announced last week to address COVID and the travails of the property sector.

* While the property-related announcement seems to have brought some life back to a badly-struggling property sector, in the end it doesn’t address the fundamental contradiction that policymakers must resolve. Beijing has no choice but to impose discipline on the out-of-control property sector and to cut it down to size, but it cannot do so without creating far more economic pain and economic (and perhaps political) disruption than it is willing to bear.

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