After supporting the real estate sector.. An imaginary jump in the stocks of Chinese development companies

Senior Chinese officials, including President Xi Jinping, stressed that the country's economy is "facing new difficulties and challenges" during a meeting to discuss the economic situation.

Chinese President Xi Jinping said Beijing will strive to achieve its annual development goals.

The meeting pointed out that "the current economic process faces new difficulties and challenges, mainly due to insufficient domestic demand, operational difficulties for some companies, high risks and hidden dangers in basic sectors, and a complex and acute external environment."

The ruling Communist Party's Political Bureau holds a meeting in late July to review the country's economic situation before the summer vacation in August. The 2023 meeting comes days after the publication of economic indicators that were below expectations.

The meeting recognized the need for China to implement specific and effective macroeconomic regulation, and strengthen counter-cyclical regulation and policy precautions, calling for efforts to increase domestic demand and "appropriately adjust and improve real estate sector policies."

China sets a modest target for economic growth for this year at around 5 %.

Chinese real estate

In another hand, Shares of Chinese real estate developers recovered after the country's top leadership pledged to improve and adjust property policies to ensure the healthy development of the sector.

The Bloomberg Intelligence Developers Index rose 7.9%, the highest level since Dec. 9, as some traders attributed the gains to short pressure.

The country's real estate sector is struggling to get out of the credit crunch after the government suppressed its debt levels in August 2020.

Years of explosive growth also led to the building of ghost towns as supply outpaced demand as developers looked to capitalize on the appetite for homeownership and real estate investment.

Wall Street banks warned that weakness in China's real estate sector could be a drag on the economy for years to come and could even affect countries in the wider region.

Real estate market

Economists at Goldman Sachs said the real estate market is expected to experience an "L-shaped recovery" defined as a sharp decline followed by a slow rate of recovery.

Official data last week showed a 7.9% drop in real estate investment in the January-June period. This is sharper than the 7.2% decline recorded in the January-May period.

In related context, Chinese stocks and the yuan made strong gains on 25-7-2023, after promises from the country's top officials to boost the flagging economy, provide more support for the faltering real estate sector, and reduce the debt burden of local governments.

The Communist Party's Politburo, the highest decision-making body led by President Xi Jinping, pledged to adjust policies for the real estate sector at a major economic planning meeting.

Concerns of private sector

Beijing's pledges to extricate the housing sector from severe recession also revived global metal prices, especially copper and iron ore, as the real estate market represents about 40 percent of Chinese demand for steel, and it is also important for the consumption of minerals such as copper, aluminum and zinc.

China announced that it has identified several key sectors that will be focused on stimulating private investment, in the context of the government's efforts to boost private sector growth in the country.

The Chinese National Development and Reform Commission said it will work to address the concerns of private sector enterprises related to financing difficulties, in the areas of transportation, water conservation, clean energy, new infrastructure, advanced manufacturing and modern agriculture.