Editorial | China property push reflects need to raise consumer confidence
The cut in the key reference rate for mortgage loans may have been expected, but it shows monetary policy is squarely aimed at fighting deflation
China has made another move to prime the pump of the struggling property sector and shore up sagging consumer confidence. On Monday, the People’s Bank of China slashed its key reference rate for mortgage loans.
Coming just days after central bank governor Pan Gongsheng forecast it, the move should be seen as one aimed at stabilising a sector mired in a slump since the Covid-19 pandemic.
The bank cut the benchmark five-year loan prime rate by 25 basis points to 3.6 per cent and the one-year lending rate from 3.35 per cent to 3.1 per cent. Up until July, the focus of government policy moves was on boosting growth in sectors such as hi-tech and financial services rather than those in traditional areas.
The leadership is trying to orchestrate a shift of the economy up the value chain to tap into more modern growth sectors and help it escape the so-called middle-income trap.
The slump has exposed some developers’ overreliance on borrowing to finance growth – a habit that should not be encouraged.
But with property development and related businesses making up 25 per cent of the economy, Beijing can ill-afford to ignore the sector’s woes.
Homeowners with weak property values are less likely to spend. And so authorities are trying to prop up the market and boost its recovery without signalling an ill-advised return to relying on it.
