(Bloomberg) -- Chinese authorities have rolled out several measures in the past four months to revive an economy battered by Covid lockdowns and a persistent housing slump.
Much of the focus has been on boosting funding for infrastructure, easing a liquidity crunch for property developers, and reducing borrowing costs for businesses and homebuyers.
Despite that added stimulus, the response from economists and financial markets has been muted: Of at least 25 official pledges of support for the economy since March 16 -- when Vice Premier Liu He led a coordinated effort to address investors’ fears -- only four have coincided with a 2%-plus gain in stocks.
Many economists say a meaningful rebound in the economy will be elusive as long as Beijing sticks to its harsh Covid Zero policy, which requires authorities to lock down cities when outbreaks occur. Unlike previous downturns, the government is also trying to revive the economy without relying on property, a sector that contributes about 20%-30% of gross domestic product.
Here’s a look at the support measures announced so far:
Aug. 24: 1 trillion yuan stimulus package
The State Council, China’s cabinet, outlined a package of 19 measures to help the economy. They included: 300 billion yuan of funds to state policy banks, like the China Development Bank, to invest in infrastructure projects; 500 billion yuan of local government special bonds -- also a major source of infrastructure spending -- from their previously unused quotas; and 200 billion yuan of bonds to be issued by state-owned power generation companies.
Aug. 19: 200 billion yuan special loans for property
The People’s Bank of China, along with the finance and housing ministries, said policy banks will provide special loans to property developers so they can finish delayed and stalled projects. The issue has been of particular concern to authorities after hundreds of thousands of angry homebuyers embarked on an unprecedented mortgage strike because of unbuilt homes. The loans to policy banks could be worth 200 billion yuan, according to people familiar with the plans.
Aug. 15: 10 basis-point interest rate cut
The central bank unexpectedly cut its key interest rates by 10 basis points shortly before the release of official data, which painted a grim picture of the economy struggling to cope with continued Covid disruptions, a property downturn and cautious consumers. Banks followed a week later with a bigger-than-expected 15-basis point reduction in their five-year benchmark lending rate, which may drive mortgage costs to a record low.
June 30: 1.1 trillion yuan policy bank financing for infrastructure
The PBOC said it will support China Development Bank and Agricultural Development Bank of China to raise a total of 300 billion yuan through financial bonds, with the funds used to replenish the capital of major infrastructure projects. Earlier in June, the government had ordered the three big policy banks to lend an additional 800 billion yuan on infrastructure projects.
May 23: 33-point rescue package
The State Council rolled out an expansive package of 33 measures, which included: 142 billion yuan in additional value-added tax rebates and 300 billion yuan of railway construction bonds. Local governments were ordered to accelerate their bond sales.
The package also had a pledge to increase the scale of goal to increase the National Financing Guarantee Fund’s re-guarantee business by over 1 trillion yuan, which is mainly used to support financing of small and agricultural businesses.
May 20: 35 basis-point cut to minimum mortgage rate
Chinese banks reduced the five-year loan prime rate, a reference for mortgage rates, by a record 15 basis points, which came on top of the PBOC’s 20 basis-point reduction in the floor for mortgage rates. The size of the moves indicated authorities’ urgency in seeking to boost housing demand as consumers increasingly shunned debt and piled up their savings.
April 15: 25 basis-point cut to reserve requirement ratio
The PBOC reduced the amount of cash banks must keep in reserve by 25 basis points for most lenders, a move that unleashed about 530 billion yuan of long-term liquidity into the economy. The size of the reduction was smaller than expected.
©2022 Bloomberg L.P.
China’s Stimulus: All the Steps Taken Recently to Boost Economy - BNN Bloomberg
Read More
No comments:
Post a Comment