Fiscal support for unfinished housing possible

There is scope for China's central government to scale up fiscal support for the delivery of unfinished housing to further address the property downturn — a key downside risk facing the economy, experts at the International Monetary Fund said on Wednesday.

Sonali Jain-Chandra, China mission chief of the IMF's Asia and Pacific Department, said that while the Chinese government has been making efforts to provide funding for pre-sold housing delivery through banks, there is a need to scale up the support as the size of unfinished pre-sold housing remains quite large.

"Fiscal support needs to be greater," Jain-Chandra said at the sidelines of the press briefing after the IMF's annual assessment of the Chinese economy, namely the China Article IV consultation mission.

In its staff report for the 2023 Article IV consultation, the IMF suggested that a central government-funded housing completion program worth around 5 percent of GDP is needed to complete taken-over projects or provide partial compensation to affected homebuyers. 

Jain-Chandra said the fund has updated the figure that will be released later. "We think that if that money is used to get rid of the problem of the property sector, then the future growth will be higher, confidence will be higher and revenues will be higher. So the economy will be on a different path."

Gita Gopinath, first deputy managing director of the IMF, also said at the press briefing on Wednesday that the fund sees scope for a more comprehensive policy package to address property sector issues, including deploying central government resources to help homebuyers of pre-sold unfinished homes.