1/6 "'To save the property market is to save the economy,' said an associate professor of economics at Tsinghua University." This suggests just how little some analysts understand the problems in the property sector. nytimes.com/2022/11/25/bus…

2/6 Even if they don't realize it, they are implicitly assuming that things were fine until Beijing's clumsy 2020-21 intervention in the property market, and that if only Beijing can reverse that intervention, things will once again be fine.

3/6 But everything was not fine in the Chinese economy. It's continued growth had become overly dependent on massive amounts of non-productive investment, and the property sector was one of the two main sources of this investment.

4/6 The historical precedents (and common sense) should make it clear that it is impossible to adjust from a property bubble without pain, and with one of the biggest property bubbles in history, this will be all the more true for China. carnegieendowment.org/chinafinancial…

5/6 Instead of trying to reverse the contraction in the property sector, China would be much better off if Beijing instead implemented policies that aggressively accommodated and countered the inevitable (and necessary) contraction in the property sector.

6/6 Instead of backing away from rebalancing, in other words, China's best hope over the medium term is to accelerate it, which means among other things a much smaller property sector and much lower property prices.