Thread by @RChoongWilkins

This is what the NPC means for China's beleaguered property sector. A🧵

TLDR: No turnaround for developers. This is about limiting the fallout of the crisis: boosting growth, supporting local govts, encouraging state-led projects, reducing systemic risks as defaults rise. 1/10

TOP LEVEL: China’s ambitious 5.5% growth target suggests more stimulus is on the way. Ultimately accommodating monetary/credit/fiscal policies are about stabilizing growth. Not reversing the clampdown on developer debt. 2/10
bloomberg.com/news/articles/…

LOCAL GOVERNMENT: Local govts are getting more cash: transfer payments to local govts will jump 18% vs last year. That'll help make up for falling land sales.

Inexpedient to allow the first default of a public LGFV bond, but don't rule it out, finances remain precarious. 3/10

INFRASTRUCTURE: Beijing's changed stance to focus on growth/stability from curbing debt is key. Last year quota for special local govt bonds – which fund public construction projects - wasn't used up because spending was heavily scrutinized. 4/10

That's likely to change. If this year + last year’s unused quota is used, it'll be easier to combat the consequences of private developments grinding to a halt – boosting infrastructure, employing construction workers, contractors/suppliers. 5/10

bloomberg.com/news/articles/…

PROPERTY: All this will ease the fallout of the developer crisis but won’t help builders. China is setting up a financial stability fund and wants stable home prices. The focus is curbing systemic risk. More intervention won't support stressed firms. 6/10
bloomberg.com/news/articles/…

NO FRESH PRESSURES: No new clampdown measures for builders -- eg. no deets of property tax pilot. But all the usual mantras reiterated: Housing isn't for speculation, improve regulation of developers' offshore debt, prevent offshore debt risks. 7/10
washingtonpost.com/business/how-t…

CREDIT MARKETS: Is all this enough to help financial markets? Certainly not credit markets. We haven't even seen a brief bump in sentiment. Chinese junk dollar bonds -- dominated by developers -- hit a fresh low on Friday at ~65 cents on dollar. They're falling again today. 8/10

SIDE BAR: Are Chinese property bonds still investible? How can we tell if the clampdown has peaked? 9/10

bloomberg.com/news/articles/…

EVERGRANDE: Billionaire chairman Hui Ka Yan requested 'personal leave' to miss the annual meeting of China’s top political advisory group. All eyes now on how and who will be blamed for Evergrande's collapse. (See HNA, Huarong for prior examples) 10/10
bloomberg.com/news/articles/…