China is still in the early stages of recovery after last year’s real estate development debacle, but support from the country’s government could help dig itself out of a hole.
The Evergrande Crisis already upended China’s economy in 2021, but add the global inflation headwinds of 2022 and the country certainly has its work cut out for it in order to turn things around. China’s government, however, is making the necessary moves in order to ease the uphill climb.
“Chinese authorities are making their biggest effort yet to end a crisis in the country’s vast real estate sector that has weighed heavily on the economy over the past year,” CNN reported. “Shares of China’s biggest property developer Country Garden soared as much as 52% in Hong Kong after Beijing on Friday unveiled a 16-point plan that significantly eases a crackdown on lending to the sector.”
In order to re-ignite the real estate sector again, China’s government is turning to more lax financial requirements as one of its key measures. This includes less stringent underwriting requirements for borrowers in order to turn prospective buyers in to actual buyers.
“Key measures include allowing banks to extend maturing loans to developers, supporting property sales by reducing the size of down payments and cutting mortgage rates, boosting other funding channels such as bond issues, and ensuring the delivery of pre-sold homes to buyers,” the report added.
Play a Real Estate Turnaround
If China’s government can help spur a turnaround, look to real estate in the country as a value proposition. Rather than own the real estate itself, consider an exchange-traded fund such as the Global X MSCI China Real Estate ETF (CHIR).
CHIR seeks to provide investment results that generally correspond to the price and yield performance of the MSCI China Real Estate 10/50 Index. The index tracks the performance of companies in the MSCI China Index (the “parent index”) classified in the real estate sector, as defined by the index provider. Summarily, ETF investors get the following:
- Targeted exposure: CHIR is a targeted play on the real estate sector in China — the world’s second-largest economy by GDP.
- ETF efficiency: In a single trade, CHIR delivers access to dozens of real estate companies within the MSCI China Index, providing investors an efficient vehicle to express a sector view on China.
- All share exposure: The index incorporates all eligible securities as per MSCI’s Global Investable Market Index Methodology, including China A, B, and H shares, red chips, P chips, and foreign listings, among others.
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