China is considering cutting property taxes to support the housing market, which accounts for about a quarter of gross domestic product. Regulators are drawing up proposals that would allow major cities like Shanghai and Beijing to reduce property transfer taxes to 1%, down from the current 3%, Bloomberg reported.
China's real estate sector has grown rapidly over the past two decades, but a prolonged downturn in the industry has weighed on economic growth, with the country targeting growth of around 5% for 2024. To support the market, China announced in October plans to increase credit for unfinished housing projects to over $500 billion.
In recent months, the Chinese government has rolled out a series of stimulus measures, including cutting interest rates and easing some restrictions on home purchases, to boost economic activity. The government has also announced plans to tackle public debt, in an effort to ease the belt-tightening by local governments that has slowed the domestic economy.
Policymakers have approved a proposal to convert local government debt worth 6 trillion yuan (about $840 billion) into official loans on more favorable terms.
These hidden debts are loans that local governments are responsible for paying but have not yet disclosed. The move will give local governments more resources to develop the economy and protect people's lives, according to Chinese state media.
At the same time, Chinese policymakers are also watching for the possibility of increased trade tensions following Donald Trump’s re-election as US president. On November 11, the National Development and Reform Commission (NDRC) called on the government to boost domestic demand to mitigate the impact of external shocks. By pledging to impose heavy tariffs on Chinese goods, Trump could add to the woes of the world’s second-largest economy, especially as domestic consumption has yet to recover strongly amid a prolonged housing crisis.
In the coming period, "the priority of the domestic market in the economic cycle will become increasingly obvious," according to a commentary in the NDRC's Economic Daily. Focusing on domestic demand is not only a "strategic requirement for national development, but also helps to reduce the impact of external factors and declining foreign trade demand."
