China Central Bank Pledges Housing Market Support as Curbs Bite: Economy

China’s central bank pledged support for first-home buyers as a crackdown on real-estate speculation threatens to trigger a property slump in the world’s second- biggest economy.

Officials will increase support for construction of affordable housing and ensure that “loan demand from first-home families” is met, the People’s Bank of China said on its website yesterday evening.

Policy makers aim to limit public discontent by making housing more affordable, with Vice Premier Li Keqiang, a possible contender to be the next premier, describing the distribution of low-cost homes as a key test of government credibility. At the same time, the ruling Communist Party aims to avoid the economic “hard landing” that Fitch Ratings said yesterday is a key global risk.

“The government doesn’t want to see home transactions slide too fast -- that may hurt economic growth,” said Lu Ting, a Hong Kong-based economist at Bank of America Corp.

Elsewhere in Asia, Japan’s current-account surplus slid to a 15-year low in 2011 as increased energy demands after the March earthquake bolstered imports amid a global slowdown that has curbed demand for the nation’s goods, a report showed. The excess shrank 44 percent from a year earlier to 9.63 trillion yen ($125 billion), the Finance Ministry said in Tokyo today.

Greek Rescue Plan

Asian stocks rose, with the MSCI Asia Pacific Index advancing 0.7 percent as of 1:54 p.m. in Tokyo, ahead of more efforts by Greek leaders to seal a rescue plan with creditors to limit the euro region’s debt crisis.

In Europe, a report today may show that German exports fell 1 percent in December from a month earlier, according to the median estimate in a Bloomberg News survey of analysts. Spain’s industrial production dropped for a fourth month in December on a year-on-year basis, another report may show.

A U.S. report on mortgage applications may provide more evidence on the state of the nation’s housing market.

In China, the government aims to both reduce the risk of bubbles in the real-estate market and limit discontent among the poor. The Communist Party says it plans to add 36 million units of affordable or social housing by 2015 as it seeks to address a widening income gap and public anger over high property prices.

Vice Premier Li said the government’s ability to distribute affordable housing fairly will be an important test of its credibility, the official Xinhua News Agency reported yesterday. Li is a possible successor to Wen Jiabao as premier, according to analysts including Willy Wo-Lap Lam, an adjunct professor of Chinese history at the Chinese University of Hong Kong.

Falling Prices

The central bank statement added to previous assurances for first-home buyers, including Housing Minister Jiang Weixin saying in December that they would get priority for loans.

Home prices in 52 of 70 major cities declined in December from November, according to government data. Contract sales, or sales booked before apartments are completed, dropped 30 percent in December at China Vanke Co. (000002), as the country’s biggest developer by market value offered fewer homes as of November.

China’s economy grew 8.9 percent in the fourth quarter from a year earlier, the slowest pace since the first half of 2009. Home prices have declined in cities from Beijing to Wenzhou.

Jim O’Neill, the economist who coined the term BRIC for developing nations Brazil, Russia, India and China, said Jan. 17 that Chinese officials had acted to avoid the “wild housing bubbles” that many western nations had experienced. O’Neill, chairman of Goldman Sachs Asset Management, said he doesn’t expect a “hard landing” for China.

Loan Policies

The central bank said yesterday that it will continue to implement “differentiated” housing-loan policies. Down-payment ratios and mortgage rates vary for first-time and multiple-home buyers and local authorities have a range of restrictions, including based on whether buyers are local residents.

“The PBOC (PBCZ) is opening a small window for property and is starting selective easing on the sector,” said Yao Wei, a Hong Kong-based economist at Societe Generale SA. “Real estate activities have cooled a lot in recent months,” threatening to hurt economic growth, she said.

To contact Bloomberg News staff for this story: Li Yanping in Beijing at yli16@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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