Imminent Aid Package for Chinese Economy Amid Real Estate Crisis

The day after the Chinese central bank announced an extension to the end of 2024 of support measures for promoters – it urges banks to renew existing loans and adjust repayment terms – the main state financial newspapers report today that a new aid package for the struggling economy is imminent. It would also concern the critical real estate sector and would also aim to strengthen business confidence.

The Shanghai Securities News notably quoted Wang Qing, chief macroeconomic analyst at Golden Credit Rating, as saying that policymakers could decide on easing mortgage rules and lowering interest rates for home loans.

The second largest economy in the world is on the verge of deflation, new economic indicators published yesterday showed, confirming China’s problems in reviving its activity beyond the short-term boost provided by the end of the zero-Covid policy. The contraction in producer prices in China deepened in June (-5.4% after -4.6% in May and -5% expected by the Bloomberg consensus) while consumer prices (+0% against +0.2% previously and +0.2% expected) remained stable.

The real estate crisis in China, visibly more serious than Beijing’s initial estimates, is stifling the Chinese recovery.

Home sales resumed their decline in June, after a brief rebound at the start of the year, adding pressure on indebted developers and weighing on global prices for metals, such as iron ore and copper .