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Shaky foundations

When times are tough, governments are supposed to offer a helping hand. China is no different in this regard. Real estate may be the next to benefit from central government benevolence, following earlier measures to ease pressure on exporters and promote the beleaguered stock market. Beijing held a bond auction yesterday and the products under the hammer promised a much lower yield than everyone had expected. Experts say this foreshadows a cut in interest rates, which would serve to shore up growth in general and the property market in particular. Property is said to account for a quarter of China’s fixed-asset investment and 10% of its total employment – not a sector you want to trifle with. Beijing may also roll back many of the measures it imposed over the last two years to restrain what was then a runaway real estate market. Time will tell how effective government support might be. Exporters have been reunited with their much-missed tax rebates but you’ll have trouble finding anyone who is bullish about the sector’s prospects. Similarly, the stock market is still struggling despite the axing of stamp duty and government investment in major bank stocks. Yesterday we talked about plans drawn up by China’s steelmakers to reduce output in a bid to push up sagging prices. These primary industries are always the first to come under the cosh when there is less action in the property market. There was more misery for metals yesterday as copper, zinc and aluminum futures hit the bottom of their daily trading range in Shanghai, an after-effect of the slump in global commodities prices at the end of last week. Comfort yourselves that whatever properties do get built, they may be more environmentally-friendly. The Asian Development Bank has launched a pilot program in China to make it easier for energy-efficient building projects to get funding.

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