China's central bank has released a series of economic stimulus plans, including cuts to mortgage interest rates and the required cash reserve ratio — the latter of which will allow commercial banks to inject $140 billion into the market — among other monetary policies aimed at reviving the housing market and stimulating economic growth.
Many Chinese internet users applauded this initiative, but few expressed immediate willingness to buy a house. Analysts said the policies are "too late and too few," since housing prices in China have fallen by half in some areas, leaving people wary of purchasing homes that could further decline in value.
The heads of China's three major financial institutions — including Pan Gongsheng, the governor of the People's Bank of China; Li Yunze, the director of the National Financial Regulatory Administration; and Wu Qing, the chairman of the China Securities Regulatory Commission — on Tuesday unveiled the country’s most powerful economic rescue effort since the end of the COVID-19 pandemic.
Pan said that soon, commercial banks will be advised to reduce the interest rate of existing mortgages by about 0.5 percentage points on average, and the minimum down payment ratio for second homes will be reduced from the current 25% to the same 15% as the first home. He said this policy is expected to benefit 50 million households and 150 million people by reducing the nation’s total interest bill by about 150 billion yuan, or $21.3 billion, annually.
Pan said that depending on market conditions, the central bank may consider cutting the required cash reserve on commercial banks by another 0.25 to 0.5 percentage points before the year’s end.
Most Chinese internet users lauded the mortgage rate cuts. But no one answered affirmatively when a user under the name "Mushroom's Second Sister" in Zhejiang asked on Weibo, "Will everyone be more willing to buy a house?"
A Weibo user from Guangdong under the name "Chun Sheng Qi" said flatly, "No.”
Another Weibo user in Zhejiang under the name "Little Lazy Pig Little Lin Lin" said, "Is there a possibility they cut the interest rate to entice you to buy homes, and then they will increase the interest rate after a few years? They have the final say on the interest rate increase and reduction anyway."
A real estate analyst in Taipei told VOA on the condition of anonymity due to the issue's sensitivity that the new policy may not help restore confidence for Chinese home-buyers, who will be less inclined to spend lifetime savings on properties amid China’s sluggish economy, which has been hard-hit in recent years by the pandemic, the U.S.-China trade war and the global economic recession.
She said that while governments around the world have been easing monetary policies to stimulate post-pandemic economic recovery in the past two years, the Chinese government has not taken action, allowing the economy to deteriorate. It is "too late" to introduce the stimulus package, she said.
She added that China’s policymakers are still holding onto an old development model and counting on the property market to drive the economy. But China’s housing market is taking a hit from the country’s declining birthrate. Young people who will inherit a house from elders will not invest in the housing market. Those whose families own no properties may not be able to afford one because of their financial obligations to support elders or children.
Francis Lun, CEO of Geo Securities in Hong Kong, said the policies are "too late and too few" but are better than nothing.
He said that the People's Bank of China should have launched them a year ago, and the scale of 1 trillion yuan is not enough because developer Evergrande alone has $300 billion in debt. Other Chinese real estate companies also sit on billions in debt, so Lun expects China’s central bank to ease the monetary policy again in coming months.
Lun told VOA by phone that to advance structural reform, China should also “replace land sales with property tax revenue as local governments’ source of incomes… Or property prices won’t be stabilized, which will only worsen the local economy.”
Adrianna Zhang contributed to this report.
