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中国棚改刹车 凸显地方政府债务困境


China aims to nearly halve the amount of shantytown renovations it started in 2019 compared with last year, according to official data, signaling that the country's decade-old shantytown renovation program is coming to a halt.


Shacks to monetization of resettlement has become in recent years to promote the third - and fourth-tier cities housing prices.


At present, however, China's economy is in a downturn, and revenue from land transfer fees is also declining. Many local governments cannot make ends meet.

十年棚改刹车 今年棚改开工量减半

10 years shed changes brake this year shed changes construction amount halve


About 2.85 million shantytowns across China will be rebuilt in 2019, according to an official figure, much lower than the 4.5 million expected by the outside world, and half of the 6.26 million expected in 2018, local media China business news reported on April 25.


In terms of investment, 1.74 trillion yuan was invested in the renovation of rundown houses in 2018, and about 6 trillion yuan was invested from 2013 to 2017.


The shrinkage of the shed was a sign of things to come.


From 2018 to 2020, the target is 15 million shanty towns with an annual average of 5 million shanty towns. From 2015 to 2017, the target is 18 million shanty towns with an annual average of 6 million shanty towns with an annual average of 6 million shanty towns with an annual average reduction of 1 million shanty towns.


In recent years, the monetization and resettlement of the shanty towns have brought about many negative effects.


While helping third-tier and fourth-tier cities deal with their housing inventory, it has also contributed to local price fluctuations.


Third - and fourth-tier cities are major drivers of housing prices


In 2017, housing prices in third-tier and fourth-tier cities exploded collectively, with high-rise buildings going up and prices soaring.


In the first half of 2017 alone, real estate sales in third-tier and fourth-tier cities grew 25 percent year-on-year, while those in first-tier cities grew only 4 percent.


The main force behind pushing up third-tier and fourth-tier cities is the "monetization" of shanty towns.


Since the beginning of 2016, the proportion of "monetized resettlement" for shantytown reconstruction has increased significantly, and the residential sales supported by monetized resettlement contributed to 40% of the national residential sales growth in 2016 and about 50% of the sales growth in the first half of 2017.


In 2014, China's real estate faced the problem of high inventory, and the expansion of housing resettlement will exacerbate the inventory pressure.


Central mother surprise move, for its AD hoc mortgage supplementary loan (PSL) tools, increase the proportion of monetary resettlement, become a force of China's monetary and fiscal stimulus, demolition upstart was born.


Monetized resettlement is to guide the housing demand of the residents in shanty towns to the commercial housing system, and create the housing demand for the residents without the housing demand.


Demolition households collectively buy houses on a large scale, and houses in some areas are digested within a short period of time. Developers and distributors take the opportunity to raise prices. Demolition households hold a large amount of money, and even cause the situation of no houses to buy in panic buying areas.


Loose policy environment, coupled with the fermentation of media propaganda, more demand was released in advance.


A wave of property grabs such as snowballing in a short time more and more rolling, three or four line prices straight up.


Shantytown housing prices have become the current round of one of the main driver.


Financial times: shantytown reform highlights local government debt woes


The financial times reported on the 25 April that some local governments were delaying the payment of compensation and rehousing for resettled households amid low land sales in China because of debt burdens and budget gaps.


China's central government last summer ordered local governments to rein in cash compensation because of concerns that the payments would overinflate property prices in smaller cities as a result of the massive liquidation of housing inventories caused by monetized resettlement in the past few years.


Some local governments are delaying compensation for displaced households and building new homes, leaving many without permanent housing.


The shantytown project has brought considerable revenue to the local government.


Land earmarked for shanty towns is sold to property developers, with a surplus after residents are compensated.


The transformation of shantytowns is a major factor driving the local government's land transfer boom.


Revenue from land sales by local governments was 6.5 trillion yuan last year, up 25 percent from 2017.


Now China's land transfer market has slowed.


Revenue from land sales fell 34 per cent in the first two months of the year after a 5 per cent fall in local government land sales was the biggest since the economic turmoil of 2015.


The average price of land sold in Chinese cities fell 11 percent in the fourth quarter of 2018, according to official statistics.


Wang yongqin, an expert on local government finances at fudan university in Shanghai, said: "in some places, the income from shantytown reconstruction projects is good.


But in fourth-tier cities, the government is very poor and may not be able to implement this policy.


Moody's, the rating agency, said local governments had long spent more than they earned and there was a huge gap between their revenues and expenditures, which has grown larger in recent years.


The biggest gap is in central and western China, where jiaozuo is located.


Analysts said measures such as cutting compensation payments and delaying the construction of resettlement homes reflected a cooling of the residential market in smaller cities in recent months, making it more difficult for authorities to recoup compensation payments through land sales.


Since last summer, China's central government has eased financial pressure on commercial Banks by encouraging local governments to issue "special" bonds for shantytown reconstruction.


According to data collected by wind information, local governments have raised about rmb3tn in this way since last June.


But areas with weak housing markets may struggle to raise capital.


A shantytown conversion bond in a small city in guizhou province was cancelled this year because of a lack of interest, according to a banker familiar with the matter.


Analysts say areas with weak land demand will struggle to raise money to pay for their shantytown redevelopment projects.


In these regions, new bond sales may not be enough to ease fiscal pressure.


From April 1 to the end of 2021, 3.6 trillion yuan of local government debt was due, according to Bloomberg data.


"The annual new quota will not be enough to cover the shortfall for some local governments, even if there are higher [bond issuance] anticipated quotas this year," s&p global said.


It also said there was "limited scope for continued issuance in some regions as they are close to the debt ceiling".


According to cicc, an investment bank, local government debt in 23 provinces exceeds 300% of their revenues, and in 10 provinces it exceeds 500%.

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