In a significant move to bolster the private sector and stabilize the real estate market, the Chinese government convened an extraordinary meeting of the Communist Party’s Politburo, led by President Xi Jinping. The meeting emphasized the need for necessary fiscal spending and comprehensive economic support.
Addressing Economic Challenges
Xi Jinping highlighted the urgency of assisting enterprises in overcoming current difficulties. “We need to help enterprises overcome difficulties and comprehensively evaluate the economic situation,” he stated. The report from the meeting stressed the importance of fostering confidence and enhancing the responsibility among party cadres to innovate and take charge.
The discussions culminated in a commitment to promote adequate fiscal spending and effectively implement existing policies. Incremental measures are also set to be launched, aiming to achieve an annual growth target of approximately 5 percent.
New Stimulus Measures Announced
The meeting followed the announcement of a new stimulus package by People’s Bank of China (PBOC) Governor Pan Gongsheng on September 24. He revealed that the banks’ reserve requirement ratio would be reduced by 50 basis points, releasing about $142.2 billion for new lending. Depending on market liquidity throughout the year, this ratio may see further cuts of 0.25 or 0.5 percent.
Additionally, the PBOC plans to decrease the seven-day repo rate by 0.2 percentage points to 1.5 percent. These adjustments are expected to lower the medium-term lending rate by approximately 0.3 percent. Furthermore, both the prime interest rate (LPR) and deposit rates are anticipated to decline by 0.2 to 0.25 percentage points.
Easing Mortgage Pressures
In a bid to alleviate financial burdens on households, the central bank will also mandate commercial banks to reduce interest rates on existing mortgages by an average of 0.5 percentage points. The minimum down payment for second-home buyers nationwide will be lowered to 15 percent, down from the previous 25 percent.
While specific timelines for the implementation of these measures have not been disclosed, the government’s proactive approach signals a commitment to stabilizing the economy and supporting the real estate sector.
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