The People's Bank of China (PBOC) has introduced a comprehensive set of monetary policy adjustments aimed at boosting economic growth and stabilizing the property market. Governor Pan Gongsheng announced the measures on Tuesday, signaling a proactive approach to address ongoing economic challenges.
Support for the Housing Sector
To alleviate pressures in the real estate market, the PBOC has lowered the minimum down payment for second-home mortgages from 25% to 15% nationwide. Additionally, commercial banks are being guided to reduce interest rates on existing mortgages to align with new loan rates, with an average expected reduction of 50 basis points. These changes are projected to benefit 50 million households, reducing total interest expenditure by approximately 150 billion yuan ($21.3 billion) annually.
Wang Silan, a Beijing resident, shared his relief at the new policies. With a 30-year mortgage at a 4.5% interest rate, Wang currently pays 5,700 yuan ($810) monthly. The anticipated one percent reduction in his mortgage rate could lead to significant savings over time.
Loan Prime Rates on the Decline
The PBOC has also reduced the policy interest rate for the seven-day reverse repurchase operation by 0.2 percentage points to 1.5%, leading to a downward trend in loan prime rates (LPR). Luo Yan, another Beijing resident, benefited from the earlier rate cut in May, securing a personal housing provident fund loan at 2.85%. She expressed optimism about the stability of new home demand regardless of price fluctuations.
Boosting Liquidity and Capital Markets
In addition to housing measures, the PBOC plans to lower the reserve requirement ratio (RRR) by 0.5 percentage points in the near future, injecting approximately one trillion yuan ($140 billion) into the financial system. Further reductions may be considered based on market conditions. The central bank is also introducing new tools to support capital markets, including a securities, fund, and insurance company swap facility with an initial allocation of 500 billion yuan ($71 billion).
Positive Economic Outlook
Economists have responded positively to the PBOC's initiatives. Wen Bin, chief economist at China Minsheng Bank, stated that the policies are expected to stimulate domestic demand and contribute to a steady economic recovery. Bruce Pang, chief economist of JLL Greater China, highlighted that the adjustments would support the healthy development of the real estate market and ensure the stability of bank operations.
The stock market reacted favorably to the news, with China's A-share markets surging on Tuesday. The benchmark Shanghai Composite Index jumped 4.15% at the close of trading.
Editor's Note: Wang Silan and Luo Yan are pseudonyms to protect the privacy of the interviewees.
Reference(s):
China's central bank unveils sweeping measures to boost economy
cgtn.com
