China Tackles Housing Crisis With New State Initiatives

Welcome back to World Brief, where we’re looking at China’s real estate crisis, aid deliveries to Gaza via a new U.S.-built pier, and rising antisemitism in France.

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China’s Real Estate Headache

Beijing unveiled a nationwide plan on Friday to try to stabilize the country’s floundering property sector. China’s central bank announced that it will provide nearly $42 billion in cheap loans to help local state-owned entities purchase unsold property to turn into affordable housing. Local governments in several cities have already tested this approach, but Friday’s announcement will be the first time such a program is tried on the national level.

This is “a significant historic moment” for the market, China’s state-run real estate newspaper wrote on Friday, though Beijing gave no timeline for the initiative. The plan also slashed requirements on down payments for first- and second-time homebuyers in addition to removing a floor on nationwide mortgage interest rates at a time when the average rate was already at a record low.

These measures signal “the beginning of the end of China’s housing crisis,” said Ting Lu, the chief China economist at Nomura investment bank.

For years, Beijing’s real estate sector has buckled under heavy borrowing and overbuilding. The number of unsold homes in China accounted for more than 8 billion square feet as of March, China’s National Bureau of Statistics reported, and new home prices across 70 cities hit a record-breaking decline in April, falling 3.5 percent last month compared to that time a year ago. Around 500,000 people have lost their jobs since 2021 due to the crisis.

The Chinese government first intervened in 2020, but its initial efforts didn’t stop major corporations from crumbling. In late 2021, real estate giant China Evergrande defaulted, leaving behind hundreds of thousands of unfinished homes and a debt worth hundreds of billions of dollars. A Hong Kong court ordered the group to be liquidated in January of this year. On Friday, major real estate company Country Garden began the first hearing of its own liquidation case.

At its peak, China’s real estate sector accounted for a fifth of the nation’s total GDP, but now, the property crisis has caused local governments to rack up $15 trillion in debt. Last year, Beijing instituted a series of measures that reduced interest rates and tweaked purchasing rules, and this year, the government set an overall growth target of 5 percent. But some economists worry these initiatives may not address long-term issues.

“The biggest problem is whether the government purchase program will induce private sector demand,” said Raymond Yeung, the chief China economist at ANZ. “Clearing inventory will increase cashflow to developers and help their financial stability, but it does not address private sector confidence.”

Today’s Most Read

What We’re Following

First aid shipments. Aid deliveries at the U.S.-built floating pier off the Gaza Strip began moving ashore on Friday—marking the first supplies delivered to the region by sea in the past two months. U.S. officials said the port will initially handle around 90 trucks a day before becoming fully operational at around 150 trucks. The pier was completed on Thursday amid United Nations calls for an immediate humanitarian cease-fire.

The project aims to help alleviate Gaza’s worsening humanitarian crisis, but the United Nations remains adamant that deliveries by land are the “most viable, effective and efficient” way to do so. Israeli forces took control of the Gaza side of the Rafah border crossing, a key aid corridor, earlier this month while World Food Program chief Cindy McCain warned of “full-blown famine” in the north.

Also on Friday, Israeli forces said they recovered the bodies of three hostages taken during Hamas’s Oct. 7, 2023, attack on Israel. They are believed to have been killed while trying to escape the Nova music festival massacre in southern Israel. Prime Minister Benjamin Netanyahu continues to demand the release of all remaining Israeli hostages—dead or alive—as part of ongoing negotiations.

Antisemitic attack. French police killed an armed man in northern France on Friday who was suspected of setting fire to a local synagogue and then allegedly threatened officers who tried to stop him. No one else was injured. The suspect’s motives remain unclear, but Interior Minister Gérald Darmanin called the act “clearly” antisemitic at a time when attacks against France’s Jewish community have surged following the start of the Israel-Hamas war. France has the largest Jewish and Muslim populations in Western Europe.

Meanwhile, hundreds of French officers arrived in the Pacific Ocean island territory of New Caledonia on Friday to attempt to quell violent protests that have killed at least five people thus far. Locals first took to the streets on Monday to protest a constitutional referendum that would extend voting rights in local elections to all citizens who have been residents of the island for 10 years, which critics say could dilute the Indigenous Kanak people’s influence. In response, Paris imposed a 12-day state of emergency in New Caledonia on Thursday.

Voting in Santo Domingo. The Dominican Republic is preparing to hold general elections on Sunday, and incumbent President Luis Abinader is expected to win in one round. The anti-corruption crusader last polled at 60 percent compared to former President Leonel Fernández’s 24.6 percent. If no candidate receives a simple majority, a runoff will be held on June 30. More than 8 million eligible voters will also cast ballots for vice president as well as members of parliament.

High on the Dominican Republic’s list of concerns is the growing humanitarian crisis in neighboring Haiti, where gangs control roughly 80 percent of the capital and a transitional government is struggling to quell the violence. Abinader signed off on deporting 175,000 Haitians in 2023 and has also begun building a border wall. Fellow candidates Fernández and Santiago Mayor Abel Martínez have echoed his sentiments.

What in the World?

A poll released Tuesday showed Mexican presidential candidate Claudia Sheinbaum leading the field with what percent of the vote?

A. 38 percentB. 49 percentC. 62 percentD. 75 percent

Odds and Ends

Not all press is good press. Martin Neumaier, the German Free Democratic Party’s candidate for upcoming local elections, is learning that the hard way after posting videos online of him licking public toilets and other toiletries at a railway station. Local media reported on Thursday that Neumaier has also published sexually explicit videos that show him singing the Nazi-era national anthem and smearing feces on his face to mimic Adolf Hitler’s infamous mustache. There’s a lot to unpack here.

And the Answer Is…

B. 49 percent

If she wins the presidency, Sheinbaum will have to combat fraying unity within the Morena party and accusations of being outgoing President Andrés Manuel López Obrador’s “puppet,” Ana Sofía Rodríguez Everaert writes.

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The post China Tackles Housing Crisis With New State Initiatives appeared first on Foreign Policy.