**Beijing (AFP)** – Six of China’s biggest banks said they would tweak interest rates on existing mortgages following a request to lower them from Beijing’s central bank, state media said Monday, as the country seeks to pull itself out of a housing sector slump. The measures are the latest in a raft of pledges out of Beijing since last week aimed at kickstarting the world’s number-two economy. The teetering property sector has long accounted for around a quarter of gross domestic product and experienced dazzling growth for two decades. But a years-long housing slump has become a major impediment to growth as the country’s leadership eyes a target of around five percent this year — an objective analysts say is optimistic given the many headwinds the economy faces.
On Monday, state news agency Xinhua said that China’s six major national commercial banks — including the Industrial and Commercial Bank of China, the Agricultural Bank of China, and Bank of China — had agreed to “adjust” mortgage rates for existing home loans. The move followed a request by Beijing’s central bank that they lower the rates in a bid to reduce pressure on homeowners. The rate adjustment will take place on October 31, Xinhua quoted the banks as saying. Markets have rallied in Hong Kong and mainland China on the announcements amid hopes of greater support. And on Monday, stocks in Shanghai and Shenzhen soared on the news of more support for the housing market. Property developers were among the big winners, with Kaisa shares rocketing almost 60 percent, Sunac up more than 16 percent, and Fantasia piling on more than 30 percent.
**Easing restrictions** – This week will also see a number of China’s biggest cities ease restrictions to make it easier for people to buy homes. The southern megacities of Guangzhou and Shenzhen — home to a combined 37 million people — said prospective homebuyers would no longer be vetted for their eligibility. In the centre of Guangzhou, where people were previously barred from owning more than two homes, there will no longer be any restrictions on how many a person can buy, the city said. And in the eastern economic powerhouse of Shanghai — the country’s richest city — authorities said they would lower the minimum down payments on a home to 15 percent from 20 percent starting on Tuesday. Restrictions on people originally hailing from other parts of China on buying homes in the megacities will also be relaxed, the new rules said.
Meanwhile, Beijing will lower the down payments required for a first or second home, as well as reduce the minimum tax or social security contributions needed to enter the city’s housing market, according to state broadcaster CCTV. Over 20 cities have abolished home purchase restrictions since the beginning of last year, according to an AFP tally. Meng Xiaosu, a former government official dubbed “the father of China’s real estate industry” for spearheading the country’s property reform policies in the 1990s, said more cities would likely follow suit. “This is how China can build a new development model for the property sector,” he told AFP.
**Looming ‘macro challenge’** – Housing market analyst Yan Yuejin told AFP the new moves were driven by “pressure” in the property market. “Fewer people are buying property these days,” Yan said. Getting the property market moving again, Yan said, was key to boosting lagging domestic consumption — another major drag on growth. China’s leadership last week warned the economy was being plagued by “new problems,” unveiling a host of measures aimed at boosting it in one of the biggest drives in years to jumpstart growth.
But analysts warned the “bazooka” stimulus was likely still not enough to revive the property market — and one was sceptical that Monday’s new measures would do much to help. “From a macro perspective, these policies are not that important, as these cities account for a small share of the national property market,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note. “The key policy to address the macro challenge remains…fiscal.”
Highlighting the uphill task for the government, official data showed Monday that manufacturing contracted for a fifth consecutive month in September. The Purchasing Managers’ Index — a key barometer of industrial output — stood at 49.8 points, the National Bureau of Statistics announced. Still, it represented a slight improvement from August’s 49.1 points and was above the 49.5 forecast in a survey by Bloomberg. A figure above 50 indicates an expansion in manufacturing activity, while anything below that is a contraction.
© 2024 AFP
