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WHAT IS THE GOVERNMENT DOING?
Anxious to shore up finances, China has opted for prudent and targeted measures instead of a broader but costly recovery plan advocated by many economists.
Authorities unveiled steps in July aimed at stimulating the purchase of home appliances and electric vehicles.
This was followed by tax benefits for households and businesses in a bid to support consumption.
And to further boost activity, China’s central bank has recently cut two reference rates, hoping to encourage commercial banks to grant more credit and on more attractive terms.
But the most important announcements – directed at the country’s flailing real estate industry – were made last week.
Intended to reinvigorate the sector, several major cities including Beijing, Shanghai and Guangzhou relaxed the criteria to qualify for a mortgage loan.
And first-time buyers have also obtained more preferential loan rates.
IS IT ENOUGH?
Many economists doubt it.
“The economy simply cannot recover until the property market improves,” warns research firm Gavekal Dragonomics.
Households “are presently reluctant to borrow and purchase real estate even though mortgage rates have fallen to a 14-year low”, notes analyst Arthur Budaghyan, who follows the Chinese economy for BCA Research.
A reduction in rates will not fundamentally change the situation, says Budaghyan, “because households now expect house prices to drop materially”.
In recent decades, Chinese consumers have viewed purchasing property as the best way to increase one’s savings.
But widespread economic uncertainty remains the main obstacle to the recovery of consumption.
Households now favour “savings rather than spending or investment”, notes analyst Maggie Wei of Goldman Sachs.
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