China’s central bank announced a series of measures on Tuesday aimed at making it easier for households and firms to borrow, in a bold bid by Chinese authorities to revive economic growth in recent months, stemming a housing market slump. Prices.
The central bank, the People’s Bank of China, cut short-term interest rates and rates on existing mortgages, lowered the minimum down payment required to buy a home, and freed up banks to lend a larger portion of their assets.
Central bank governor Ban Gongsheng said at a rare news conference that his agency was ready to free up banks to lend even more money if needed.
Less than a week after the Federal Reserve cut short-term interest rates by half a percentage point, China’s central bank cut its key seven-day interest rate to 1.5 percent from 1.7 percent.
In addition, the People’s Bank of China told commercial banks that they would be allowed to reduce the amount of assets they hold in reserve by half a percentage point. That move would free up banks to lend an additional $140 billion to firms and households.
The central bank’s actions may not be enough to reverse the slowdown in the Chinese economy. Studies show that some businesses prefer to borrow regardless of interest rates. They worry whether there will be enough sales within China to pay back the debt.
In a move aimed at boosting the stock market, the central bank made it easier for banks to lend to companies to buy back shares, as well as for large shareholders to buy larger stakes. China’s main stock markets, the world’s worst performers this year, rose more than 2 percent on Tuesday.
Mr. Trump said the central bank is ready to do another reserve drawdown if needed in the coming months and could double the extra money available for lending. Pan said.
The central bank allowed lenders to cut interest rates on existing mortgages by about half a percentage point. This would lower rates on some existing mortgages below 4 percent.
The minimum down payment to buy second homes, which are often bought as investments in China, will now be cut from 25 percent to 15 percent, Mr. Pan added.
Low mortgage rates will squeeze the revenues of the country’s government-controlled banks. So the central bank said it would allow commercial banks to pay lower interest rates on deposits — which would encourage some consumers to spend more.
Home prices have fallen 10 percent annually over the past three years. Before Tuesday’s actions, some economists predicted that home prices would fall even faster in the coming year. The collapse of several property developers has undermined the confidence of buyers.
As house prices fall, many households have cut back on their personal spending after losing much of their savings. Apartments were the main vehicle for property construction in China, accounting for two-thirds or more of housing stock.
Many restaurants are struggling. In Beijing, few people were on the streets Saturday evening in Sanlitun, which is usually one of the city’s busiest neighborhoods for food and window shopping. A week ago, it was easy to get a weekend dinner table at Shanghai restaurants, with lines out the door.
Sales of new apartments have fallen. With the failure of many of the country’s biggest property developers, millions of families are waiting for the completion of apartments they paid deposits for.
A growing number of Chinese and Western economists have suggested that the national government borrow money and spend heavily. But the finance ministry is wary of rising debt.
A report by research firm Capital Economics said the central bank’s actions on Tuesday were “a step in the right direction”. But this may not be enough to make a turnaround in growth until it is followed up with more financial support.
