China stirs hope in property market with latest stimulus plan

In August, more bad news swept markets, including: missed interest payments by China’s biggest private property developer by sales, Country Garden; a huge loss at rival Evergrande, whose default in 2021 rippled across the sector; and a liquidity crisis at financial conglomerate Zhongzhi.

The government stoked further distrust among investors by suddenly scrapping the publication of youth unemployment data, which had reached record levels, while consumer prices fell. Factory activity was down for a fifth consecutive month in August.

Last week, however, the government stepped up its response. In addition to reducing minimum mortgage down payments and allowing cuts to existing mortgage interest rates, it increased personal income tax allowances for children’s education and caring for infants and the elderly. On the stock market, policymakers sliced trading fees and took other measures.

“Reflationary policy is ramping up at a pace unseen in recent years,” Morgan Stanley economist Robin Xing said in a research note, adding that the measures were the strongest response since 2018, when China’s economy slowed amid a growing trade war with the US.

Hui Shan, chief China economist at Goldman Sachs, said a rough calculation of the government’s fiscal, monetary and property measures indicated they could boost gross domestic product growth by about 60 basis points.

“Even without a ‘bazooka’, if you do enough of these kinds of piecemeal easing measures, there’s still a chance you will stabilise the economy and have an impact on growth,” said Shan.

But she cautioned: “Investors are not completely convinced yet; people are looking at property transaction data to see if it really translates into stronger sales and activity.”

Much will depend on buyers’ price expectations, analysts said. With speculative activity subdued by the downturn and market oversupply, as well as China’s already high home ownership rates and weak demographic outlook, most demand will come from upgrades or

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