The crisis in China’s property market is severe enough for the government to show willingness to tackle the backlog of uncompleted pre-sold projects. While this is cheering news for many, uncertainty over the timing, scale and source of the funding remains.
Investors banking on Chinese policymakers providing aggressive stimulus are trapped in an old view of China and its economy. The news is far from all doom and gloom, but investors need to accept that China’s economy will remain vulnerable and recovery will take time.
China’s property crisis is just one of many signs that Asia’s housing sector troubles are far from over. Japan could be in for a shock if a shift from years of ultra-loose monetary policy pushes up lending rates, hitting home loans hard.