China reduces rates, initiates measures to assist decelerating economy
Date
9/24/2024 5:04:44 AM
(MENAFN) China announced a series of measures on Tuesday aimed at addressing a prolonged downturn in its property market, which is impacting the country's economic performance. The People's bank of China (PBOC) revealed plans to cut the reserve requirement ratio for banks by 0.5 percentage points in the near term, which will increase the amount of money available for lending. Additionally, the central bank reduced interest rates on loans to commercial banks and lowered down payment requirements for certain property purchases.
These actions come in response to ongoing economic challenges exacerbated by the COVID-19 pandemic, which has led to job losses and decreased consumer spending. Falling home prices have further discouraged potential buyers, despite government initiatives to stimulate demand for homes, electric vehicles, and other significant purchases.
PBOC Governor Pan Gongsheng stated that further cuts to reserve requirements are anticipated, signaling a commitment to reviving the sluggish economy. The announcement positively impacted financial markets, with Hong Kong's Hang Seng index rising by 3.6 percent and the Shanghai Composite index increasing by 3.4 percent.
In addition to supporting the property sector, the central bank plans to introduce new policies aimed at stabilizing the stock market. Analysts believe that this coordinated approach may yield better results than previous, more fragmented efforts. Julian Evans-Pritchard from Capital Economics noted that while these measures are a step in the right direction, they may not be sufficient to drive significant growth without additional fiscal support.
China's economic landscape contrasts sharply with that of the U.S., where inflation driven by strong economic growth has been a primary concern for policymakers. Instead, China is grappling with slowing growth and downward pressure on prices, driven by weak demand. The housing market has struggled since the government implemented stricter borrowing regulations for developers, resulting in defaults and unfulfilled property deliveries.
Given the significance of housing as a major investment vehicle in China, the health of the property market is crucial for supporting related industries, including construction, home decor, and appliances.
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