1. Key comments of China’s economy in 2012
Mr Xia: “Maintaining a relatively steady economic growth (in Chinese Wenzengzhang)”
and “watching out for risks amid correction of real estate sector (Fangdichan)” are the
two key issues for Beijing’s policy makers in 2012. Whether we can regulate the real
estate market artistically holds the key for economic stability for next year.
Policy tightening aimed at reining the property sector remains unchanged. “Artistically”
here means that on one hand, we have to maintain a tightening policy stance; on the other
hand, we need to carefully avoid a free-fall in property prices – an overshooting correction.
Maintaining a delicate balance between the two is critical and extremely difficult for
China’s policy makers in 2012.
2. Tightening policy in real estate is set to continue; it’s a matter of
government credibility and would not afford to be given up halfway
Mr Xia: The development of the property market is closely connected with the local
government’s financing platform – local government financial vehicles (LGFVs) – via
changes of land prices. It also relates to the well-being of commercial banks’ balance
sheets as a lion share of LGFVs’ financing is funded by bank credits. The property market
is facing a turning point given the previous tightening measures. There is a dilemma for
China’s policy makers – if tightening is too ag