How does Beijing intend to handle China's real estate bubble?
Realizing the risks of the frequent housing boom-bust cycles, the Chinese government recently announced plans to develop a “long-term mechanism” for the residential housing market.
Unlike the previous housing market policies which relied on administrative measures such as home purchase restrictions and macroprudential tools to manage house price cycles, the “long-term mechanism” aims to ensure sustained and stable development of the residential market by striking a balance between supply and demand while curbing speculation.
Key elements of the mechanism include:
(1) increasing land supply in cities where housing prices face stiff upward pressure by converting rural collective land and urban commercial land to residential land;
(2) enhancing affordability by developing
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