China cities unveiled new property cooling measures

Interest rate hikes seem to be unlikely.

Local Chinese governments in nine different cities introduced new policies over the period of September 30 to October 3 in an effort to rein in surging residential property prices.

While top Chinese policymakers are determined to curb asset bubbles, BMI Research expects targeted measures to be undertaken at the city level rather than broad-based restrictions.

" We reiterate that the rapid house price gains in Tier-1 and major Tier-2 cities already seen are unsustainable, which pose a risk to the
economy," it said in a report.

According to the research firm, the decision by nine different local Chinese governments (Beijing, Tianjin, Chengdu, Hefei, Suzhou, Wuxi, Wuhan, Zhengzhou, Jinan) to introduce new restrictions over the period from September 30 to October 3 in an effort to cool their overheated residential property markets were in line with its
expectations.

"Top Chinese leaders in the Politburo stated in its late-July meeting that they aimed to curb asset bubbles, which in our view reflects policymakers' commitment to slowly shift away from the heavy reliance on debt-fuelled growth over the coming years. However, we believe that Chinese leaders will not undertake a broad-based tightening approach such as raising interest rates to slow gains in the property market, particularly as the
industrial side of the economy is still weak," explained BMI Research.

BMI expects instead that further policies will be enacted at the local level to an attempt to curb further property price gains due to speculative activities.