China’s central bank on Tuesday announced sweeping monetary stimulus and property market support measures to revive an economy battered by slowdowns and at risk of missing its growth target this year.
The broader package represents the latest attempt by Chinese officials to restore confidence in the world’s second-largest economy after a string of disappointing data in recent months.
Among the measures are reducing the required reserves that banks must hold and lowering interest rates.
“The Chinese authorities will cut the reserve requirement ratio and the key interest rate, and will lower the benchmark interest rate in the market,” the governor of the People’s Bank of China, Gongsheng, said at a conference in Beijing.
“The reserve requirement ratio will be cut by 0.5 percentage points very soon in order to provide the financial market with long-term liquidity of about 1 trillion yuan” ($142.2 billion), he added.
More motivation
But analysts noted the absence of any policies aimed at supporting real economic activity, and given weak demand for credit from businesses and consumers, more fiscal stimulus may be needed to complement the moves announced by the People’s Bank of China to get growth back on track to achieve this year’s target of around 5%.
The real estate market support package included a 50 basis point cut in the average interest rate on existing mortgages and a reduction in the minimum down payment requirement to 15% on all types of housing, among other measures.
China’s property market has been in a deep slump since peaking in 2021. A number of developers have defaulted, leaving behind large stocks of unwanted apartments and a worrying list of unfinished projects.
Beijing has removed many restrictions on home purchases and sharply cut mortgage rates and down payment requirements to deal with the crisis, but has so far failed to revive demand or halt a slide in home prices, which fell at their fastest pace in more than nine years in August.
