BEIJING And HONG KONG, Sept 1 (Reuters) — China took further steps on Friday to help the country’s struggling economy. Top banks have approved the method for further cuts in lending rates, and sources say Beijing is planning further steps, such as making it easier to buy a home.
As part of these moves, the government has also cut the amount of foreign exchange reserves that institutions are required to hold. Investors cheered the moves, and experts said they should prevent the real estate market from falling even further.
China is grappling with a slowdown that has rattled markets around the world. The attention is now on the problematic developer Country Gardens (2007.HK) growing debt problem occurring in a sector that accounts for about a quarter of the economy.
As the pressure mounts, the government has taken some steps to stimulate the economy and revive the property market. Those steps include making it easier for people to borrow and reducing the amount of foreign currency banks must hold as reserves.
Four people with knowledge of the situation say the country will take further steps, such as making it easier to buy a home.
Two of the people said that regulators such as the Home Office, the Bank, etc. would take steps Financial inspector The measures that have been in place for some time will be implemented in the coming weeks.
Betty Wanga senior China economist NOsaid the market’s hopes were beaten by several property easing measures taken across the country in the last two weeks.
Testing a country garden
However, in the short term, the market is influenced by how investors think country garden after a key test.
Country Garden has postponed the due date for stakeholders to vote on whether to postpone domestic 3.9 billion yuan disbursements ($537 million) private bond until Friday 1400GMT to give to investors”enough time“to prepare for the vote.
Sources with direct knowledge of the situation said some mainland owners were private about it country garden The bond paid interest before the vote on Friday. They did not want to be named because they were not allowed to speak to the press.
Country Garden wouldn’t say anything.
Friday’s vote is a major obstacle for Country Garden as it tries to avoid default. A buyer of the developer’s dollar bonds said the company would be unable to pay its foreign investors if it could not roll over its domestic debt.
“It appears to be an accident involving a slow-moving vehicle”, explained the shareholder, who did not want to be named because the issue was sensitive. He or she also said that the concerns are mainly about the uncertainty of the overall economy and problems with Washington.
Country Garden, which has sold more homes than any other private developer in China, did not immediately respond to a Reuters request for comment.
There is a lot of emphasis on Beijing taking measures to support the real estate market, and people fear that the authorities will be unable to halt the decline in China’s overall economic growth.
China’s new home prices fell for the fourth straight month in August, according to a private survey released on Friday. This was because the mortgage debt crisis kept confidence low despite the government taking some relief measures.
Interest rates on deposits fall
On Friday, the central bank announced that it would reduce the foreign exchange reserve ratio starting September 15 (RRR) by two hundred basis points (bps), from 6% to 4%. This is believed to be a move to slow the rate of depreciation of the yuan.
Individual banks’ websites showed that the Commercial and Industrial Bank of China (601398.SS), China Construction Bank Corp (601939.SS) and the Agricultural Bank of China (601288.SS) were among the lenders that cut lending rates on Friday. Several medium-sized banks also announced that they would reduce savings rates by 10 to 25 basis points.
The measures helped boost people’s confidence in the market and distressed property stocks increased. China’s CSI 300 Property Index (.CSI000952) ended 2.4%while the blue-chip CSI300 index (.CSI300) rose 0.5%.
Three people familiar with the situation told Reuters on Tuesday that interest rates on deposits at major state-owned banks would fall as banks prepare to cut interest rates on mortgages soon.
On Thursday, China’s central bank and monetary regulator said first-time home buyers who already have mortgages will be able to apply to their banks for lower interest rates on their loans starting September 25.
Bank interest rates have been cut for the third time in a year. These cuts are larger than those in June and September last year.
A banking expert at Moody’s is named Nicholas Zhu said lower deposit rates will help offset some of the pressure on banks’ net interest margins, a key measure of how profitable they are.
“The deposit rate cut has a big impact because deposits account for nearly three-quarters of Chinese banks’ debt,” Zhu said.
At the end of June, China’s real estate loans were worth $5.29 trillionor 38.6 trillion Yuan. That was 17% of all loans from Chinese banks.
Beijing and Shanghai also said on Friday that they would offer concessional loans to first-time homebuyers, regardless of previous credit history.
All of China’s first-class cities have expanded the importance of first-home mortgages to give buyers greater peace of mind when purchasing.
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