Earlier in the week I speculated that China's recent housing directives might be relaxed given the pronounced effectiveness they have had in cooling markets in so short a time. Michael Pettis lays out the situation better than I in his most recent post and seems to agree:
I stated in my last post that this view of market loosening was also shared by most Chinese commentators. However further reading (and perhaps the influence of the government's recent insistence that the policies are here to stay) has led me to believe that I underestimated the current divide in opinion. Recent opinion from China commentators and blogs appears in the aggregate to support the idea that policies will continue.Regular readers know that in my view for the past two years we have veered from panic to panic – stomping on the accelerator at one time and then stomping on the brakes as few months later – and I think it is only a question of time before growth slows sharply, and we panic once again and stomp on the accelerator.
I found the following blog post to sum up the opposition viewpoint nicely. The always entertaining Pi HaiZhou had this to say in an article entitled "I would prefer to see property stocks fall and I'm unwilling to watch housing prices rise" (a much better title in the Chinese):
If the government loan restrictions for purchases of third homes are relaxed....then what has been called "the most severe property market tightening policies" will instead become the "shortest property market tightening policy ever". It implies that the state has given up on its tightening policies halfway through. It implies that the widespread cries of injustice from the ordinary people about property prices will once again be on the rise. Not only will people question the governments authority, but their credit will also become suspect. In addition, China's economy and government will be reduced to position of having been kidnapped by the property developers. Although on the surface it looks like property prices has carried the economies development, actually the increasing prices have become a ball and chain for China's economic development. Because after the ordinary person buys a high priced home, he gives up some of his consumption power for ten, twenty years. At the same time he becomes a slave to this house for his entire life. Social problems will further come around because of the high prices. The income gap will increase, society's morals will perish.... High housing prices overturn China society and have become the root of all evil for contemporary Chinese society.
I will be on vacation next week. Hope to see you on my return.