China's Property Market Is Riding Out Wobbles Successfully

To be (optimistic) or not to be: that is the question, as a somewhat opaque property picture leaves China-watchers grasping at recent slight signs of good news.

- Steve Finch

The data has been confusing to say the least. In February, new home prices in China climbed 10.4 percent compared to the same month last year—impressive by any standard. A closer look, however, would reveal that last year was a disaster for residential sales, meaning the base was rock bottom, and growth this February ranked the slowest—month-on-month—in nearly a year.

The picture could not be muddier. China’s property rollercoaster has left analysts clutching at every new data point and policy announcement out of Beijing: can the country’s real estate sector—and wider economy—ride out what looks to be an unavoidable economic storm?

Signs appear mixed, and so does reporting. When Beijing’s macroeconomic planning agency the National Reform and Development Council announced in April the easing of restrictions on hukou cards—a type of internal passport—some international media reported the measure akin to a new government stimulus for the floundering property market.

The move was nothing of the sort, both in terms of Beijing’s motivations and likely impact. On one hand, it would allow rural migrants to obtain hukou cards in cities where they work and buy property when they could not before.

But according to Andrew Polk, co-founder and partner of Trivium—a Beijing-based research firm on policy and economy in China—the measure, rather than short-term stimulus, represents long-term policy aimed at incentivizing urbanisation in the forgotten cities of China, which register millions of residents but have seen many thousands leave for big hubs with the best jobs like Beijing, Shanghai and Shenzhen.