China property rescue package gets muted reception

China's latest effort to stave off a crash landing for the economy and revive its weakening housing market failed to stir much enthusiasm Thursday among investors spooked by a raft of bad news at home and abroad.

Moving ahead on pledges of new measures to help counter the slowdown, authorities announced late Wednesday a reduction in required down payments for home purchases, a waiver on stamp taxes for real estate deals and plans to step up construction of affordable housing.

Those moves, along with a hike in subsidies for low-income students and retirees and tax relief for exporters, are part of Beijing's effort to spend itself out of a severe slowdown, economists say.

"The government appears determined to ensure a steady pace of economic growth," Jing Ulrich, chairwoman of China equities for JP Morgan Chase & Co., said Thursday in a report to clients.

The new policies drew a mixed reception from investors shell-shocked by the past year's steep losses in share prices and a slowdown in the housing market - which until recently had appeared untouched by the meltdowns afflicting U.S. and European property owners.

Share prices for property developers rose modestly in early trading but surged later in the day, with China Vanke, the industry leader, gaining 4.4 percent to 6.89 yuan. That helped boost the benchmark for the Shenzhen market, where it is traded, by 0.8 percent.

Rival Poly Real Estate, which trades in Shanghai, jumped 6.4 percent to 15.13 yuan. But its gain was outweighed by losses in banks, insurers and oil-related shares, as other regional markets tumbled. The key Shanghai Composite Index slipped 1.1 percent to 1,875.56, nearly a two-year low.

"Everyone can sense just how eager the government is to boost home-buyers' confidence, but we doubt it will work," said Du Haohui, manager of World Union Property Appraisal in Shanghai.

News earlier this week that the economy expanded in the third quarter at its slowest pace in five years, by 9 percent, prompted a new wave of measures aimed at relieving the sectors hardest hit so far by the fallout from the mortgage-lending debacle in the U.S.

"In the next six months we'll feel more pain from the global crisis," Zhu Min, vice president of the state-owned Bank of China, told a forum in Beijing on Thursday.

"We shouldn't think we are outside the financial crisis," Zhu said.

Beijing hopes to staunch a wave of layoffs, especially in export manufacturing, fearing the potential threat to stability from legions of jobless workers, and from those disgruntled over the downturns in the real estate and share markets.

Property accounts for a tenth of all economic activity in China and has wide repercussions for many other industries, such as steel, appliances and the service sector.

Housing prices rose 3.5 percent in September from a year earlier, the slowest increase in over three years. Meanwhile, indicators showed that the tendency to buy homes has fallen to a 10-year low, the official Xinhua News Agency reported.

The shift toward stimulating the industry is an about-face from the past few years when authorities have sought to cool housing speculation and excess investment to help keep inflationary pressures under control.

But the measures announced Wednesday, which focused mainly on first-time and low-income home buyers, might not suffice, analysts said.

"We think it will take time for the market to recover," Du said, adding, "We expect prices to drop further."

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Associated Press researchers Bonnie Cao in Beijing and Ji Chen in Shanghai contributed to this report.