China Eases Guangzhou Mortgage Rules: The first big city in China, Guangzhou, recently made headlines for loosening bond requirements. This shows that Beijing is trying harder to restore a weak real estate market and economy. This major step is happening at the same time that government-run financial companies are likely to lower mortgage interest rates, according to experts. First time rates have dropped this much since the global financial crisis.
The Chinese central government believes that decreasing monthly mortgage payments could revive the property industry, which drove China’s economic growth until recently. Due to falling home sales and developer failures, the industry is hurting the economy.
The value of Chinese mortgage loans reached 38.6 trillion yuan ($5.29 trillion) by June. This represents 17% of Chinese bank loans.
The Guangzhou local government administration announced that first-time homebuyers will soon be able to acquire favorable loans regardless of their credit history. This will be possible with a new tool. This will make debts easier to get.
This policy realignment is projected to affect Beijing, Shanghai, and Shenzhen, which are likely to implement the same measures. The most populous Chinese city, Shenzhen, is like this. Most housing rules that make buying a home easier have been passed in secondary towns.
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Financial markets reacted fast to Guangzhou building news. The Hang Seng Mainland Property Index in Hong Kong rose 3% immediately. China’s real estate market, which accounts for 25% of the economy, has had several crises since 2021.
This new structure is being built during a nationwide real estate downturn. All eyes are on Country Garden, China’s largest privately owned property group, when it releases its first-half financial results. Country Garden is China’s largest privately held property enterprise. This comes amid concerns that the corporation is suffering financial issues.
The Chinese government just announced more corrective measures, including interest rate changes, as concerns about the world’s second-largest economy deepen. The Chinese government today announced many corrective measures, including these interest rate reductions. However, this may hurt banks’ profits. Many of the largest Chinese banks’ net interest margins (NIM) dropped in the latest fiscal quarter.
This could make bank profitability calculations difficult. Fitch Ratings’ APAC Financial Institution director Vivian Xue expects this banking sector income shortage to continue beyond 2024. While at Fitch Ratings, Vivian Xue made these predictions. This income shortfall will worsen if the NIM and retail loan demand diminish.
After Guangzhou stated it will give out mortgages, China’s primary banking sector indicator fell 1.04%. The broader CSI300 average rose 0.02%. Some of the effects will be mitigated by state-owned banks lowering fixed-term savings interest rates by 10 to 25 basis points. Most expect these cuts to be mid-range.