Huawei’s Aito electric cars are manufactured by Seres in Chongqing, China.
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BEIJING — China revealed this week it aims to spend more than a billion dollars to bolster manufacturing and domestic tech in a bid to remain globally competitive, while divulging little new support for the struggling real estate market.
Industrial support clearly ranked first on Beijing’s priority list for the year ahead, according to three major plans released this week as part of China’s annual parliamentary meetings.
One of those reports, from the Ministry of Finance, said the central government would allocate 10.4 billion yuan ($1.45 billion) “to rebuild industrial foundations and promote high-quality development of the manufacturing sector.”
While that’s down from the 13.3 billion yuan earmarked for the same category last year, the sector overall gained greater prominence. In 2023, plans to spend on industrial development came second to support for consumption.
“Unlike other economies that went through a wrenching adjustment in their housing market, China’s investment rate isn’t falling,” HSBC’s chief Asia economist Frederic Neumann and a team said in a report Friday. “Instead, [capital expenditure] is shifting towards infrastructure and, importantly, manufacturing.”
They noted how the shift “cushions the impact of a deflating property market on growth,” but also bears the same risk as over-investment in property.
“Unless demand keeps pace with investment, and does sustainably so, a harsh adjustment ultimately beckons,” HSBC economists said.
Chinese authorities in 2020 intensified a crackdown on real estate developers’ high reliance on debt for growth. Property sales have since plunged while developers have run out of money to finish many projects, cutting into what was once about 25% of China’s GDP when including related sectors such as construction.
UBS analysts late last year estimated property now accounts for about 22% of the economy.
“Supporting the modernization of the industrial system” came first in the finance ministry’s report, followed by “supporting the implementation of the strategy of invigorating China through science and education.”
Within that second priority, the finance ministry said it would allocate 31.3 billion yuan for improving vocational education. Amid high youth unemployment, especially for university graduates, electric car company BYD and battery maker CATL are among those working with vocational schools to train staff for their expanding workforce.
Support for consumption came third in the finance ministry’s priority list this year, with no monetary value listed.
The report from the National Development and Reform Commission, the top economic planner, reiterated government plans to support some developers’ financing needs — under the eighth item on the priority list that called for preventing financial risks. The government work report presented by Premier Li Qiang gave real estate a similar level of prominence.
Tech and industrial development by contrast received more attention, especially given the new political catchphrase “new productive forces” and strong emphasis on China’s leadership in electric cars.
China faces growing pressure from the U.S., which in the last two years has cut Chinese businesses off from the high-end semiconductors necessary for most advanced artificial intelligence training. While Chinese companies are working hard on developing their own high-end chips, analysts generally predict it will take at least a few years for China to catch up.
Pressure on tech comes as the world’s second-largest economy has slowed its pace of growth after double-digit increases in decades past. Beijing this week set a national growth target of around 5% for the year ahead, a goal many analysts called “ambitious” for the level of announced government stimulus.
One of those leaders with a rocket science background is Yuan Jiajun, who in October 2022 joined the Communist Party of China’s Politburo, the second-highest level of power. Yuan oversaw Chinese space missions in the early 2000s, including the first Chinese manned spaceflight mission called Shenzhou 5.
Late last year, Yuan also became party secretary of Chongqing, one of the biggest cities in China that often serves as a stepping stone to more senior roles. The municipality reports directly to the central government, as do Beijing, Shanghai and Tianjin.
Yuan told reporters Tuesday that in order for Chongqing to reach its goal of boosting economic growth by 1 trillion yuan in four years, the city must focus on bolstering manufacturing, followed by innovation in areas including artificial intelligence and high-end materials.
He described how the city has a plan for “Digital Chongqing,” which involves consolidating information about an industry — such as the car supply chain — onto one platform that can help the government allocate resources better. By building a digital system for daily tasks, Yuan said that can free up energy and brain power for more complex problems about the future.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
