China will hold the Third Plenary Session of the Central Committee of the Communist Party of China. Why real estate is unlikely to be the main focus | Wilnesh News

BEIJING — China’s real estate problems may be serious, but analysts expect the upcoming Third Plenary Session of the Central Committee of the Communist Party of China to focus on other areas, such as high levels of local government debt and a push for advanced manufacturing.

The much-anticipated policy meeting, scheduled to take place from Monday to Thursday, is an important gathering of top members of China’s ruling Communist Party that usually takes place every five years. The plenary session was widely expected to take place last fall but has been postponed.

Larry Hu, chief China economist at Macquarie, said: “Beijing’s main challenge is to find an alternative fiscal system, as the current fiscal system that relies heavily on land sales has been hit by the collapse of the land market. And faced tremendous pressure.

He expects next week’s meeting to focus on fiscal reforms and other structural policies. Hu noted that cyclical policies, which could include real estate, are typically discussed at more regular meetings, such as China’s Politburo meeting expected in late July.

“In addition to this, policymakers are also likely to reaffirm their commitment to innovation, the so-called new productivity,” Hu said, referring to Beijing’s push to support advanced manufacturing and high technology.

The ruling Communist Party of China Central Committee is composed of more than 300 people, including full and alternate members, and usually holds seven plenary meetings every five years.

this Politburo There is a group of about 24 people on the committee.

The Standing Committee of the Political Bureau of the CPC Central Committee, composed of seven main members, is China’s highest authority headed by General Secretary of the Communist Party of China and President Xi Jinping.

The Third Plenary Session of the CPC Central Committee has always focused on economic policy. In 1978, under the leadership of Deng Xiaoping, this conference formally announced major changes in communist countries, such as China’s “Reform and Opening”.

Wang Dan, chief economist of Hang Seng Bank (China), told CNBC that at next week’s plenary meeting, “the first thing I am most concerned about is the so-called financial reform.”

She will also focus on details of banking industry consolidation, as well as signals on local government fiscal and tax policies.

“As for the real estate market, I think it should not be the focus of the plenary meeting because it is already a state that everyone has a consensus on,” Wang said. “It’s in a downturn. It hasn’t hit bottom yet.”

Although related to wealth Most families in ChinaIn addition, problems in the real estate industry are also intertwined with local government finances and their large amounts of hidden debt.

Local governments once relied heavily on revenue from land sales.

“In the medium to long term, the importance of cultivating sustainable revenue sources for local governments will increase,” HSBC analysts said in a forward-looking report on the Third Plenum of the Central Committee of the Communist Party of China on June 28.

“Expanding the scope of direct taxes on consumption, personal income, property, etc. is often considered a solution. Among these possibilities, consumption taxes may be the most effective,” analysts said. Local authorities are incentivized to promote consumption.

However, boosting your mood isn’t necessarily that simple. In the weeks leading up to the plenary session, Chinese stocks were approaching retracement territory – down more than 10% from recent highs.

“Given low private sector confidence levels, we believe the transition needs to be carefully designed and implemented at this time or risk running counter to a supportive financial stance,” HSBC analysts said.

Attempts to combat a wide range of financial risks have prompted more restrictions on the wider banking and financial industry. Since the establishment of the new Central Committee in October 2022, the Communist Party of China has increased financial supervision and technology with new commissions.

“The scale of real estate has become so large that it has absorbed all of China’s resources,” said Yao Yang, a professor and director of the China Economic Research Center at Peking University. said last month”, according to CNBC’s Chinese translation of his speech.

He believes that the excessive growth of the financial industry is the reason behind this. The hollowing out of the American industrial sector.

“In order for China to compete with the United States, we need to develop manufacturing and technology,” Yao said. “So we must restrict the financial industry, including real estate. This is the fundamental reason for the tightening of real estate and financial regulations.”

Goldman Sachs analysts said in a report last month that the average salary of brokerage firms, which affects about 0.1% of China’s urban population, will fall by nearly 20% in 2022 and still fell slightly last year.

Analysts found that salary cuts in the financial and public sectors, combined with the larger impact of local government fiscal constraints, will lead to an annual decline in urban wage growth of about 0.5 percentage points in 2022 and 2023.

Separately, China reportedly plans to cap annual salaries in the financial industry at around 3 million yuan (approximately $413,350), a cap that would be applied retroactively and require workers to return excess earnings to companies. South China Morning Post said Last week, people familiar with the matter were quoted as saying.

China’s State Financial Supervision Bureau did not immediately respond to CNBC’s request for comment.

Beijing officially announced the Third Plenary Session of the Central Committee of the Communist Party of China, saying leaders will discuss “comprehensively deepening reforms and promoting China’s modernization.” The statement noted that China’s goal is to build “high-standard Achieve socialist market economy by 2035”.

Beijing says this will be the case in 2020 “Socialist Modernization Construction” will include the per capita GDP of “moderately developed countries”, the expansion of middle-income groups and the narrowing of the gap in living standards.

This will not be an easy task, especially after being rocked by the Covid-19 pandemic and heightened geopolitical tensions. Last year, China’s per capita GDP in constant U.S. dollars was $12,174— Less than one-fifth of the United States $65,020, according to the World Bank.

While income inequality is a global problem, new research shows that it has become significantly more unequal in China Frustrated by “unequal opportunities.” That’s according to research conducted since 2004 by a team led by Martin King Whyte of Harvard University and Scott Rozelle of Stanford University.

The latest survey found that regardless of income bracket, more respondents believe that family economic conditions will be worse in 2023 than in previous years.

“The economic slowdown may mean fewer opportunities than before and raise more concerns about inequality and fairness,” the survey concluded. big data china explain. “In other words, inequality may be more acceptable when the pie is growing rapidly, but less acceptable when the economy declines.”