China is experiencing significant economic growth.
China's economic engine is struggling badly. The real estate sector is in turmoil, joblessness among the youth is increasing. Now, the authorities are taking drastic steps.
Finance Minister Li Wei has declared a series of actions to prop up the economy. Among other initiatives, the issuance of government bonds is set to increase "substantially" to aid low-income people, revitalize the property market, and replenish the reserves of state-owned banks.
China is planning to release approximately 300 billion euros through special bonds within the next three months, Li revealed. Furthermore, he declared an increase in the debt limit for local governments. "We will enhance support for local governments in dealing with state debt risks, significantly boost debt limits, and aid local governments in handling hidden debts," the minister announced.
China has sufficient capacity to issue government bonds, it was stated. Moreover, there will be more "countercyclical measures" this year.
Not long after, state media reported that China's major banks will reduce interest rates on existing mortgage loans starting October 25th. Except for specific mortgage loans in Beijing, Shanghai, Shenzhen, and certain other regions, "interest rates for other eligible mortgage loans" will be "reduced," CCTV reported. Large banks such as the Bank of China have pledged to implement these adjustments "gradually." The banks stated that the modifications will be "applied uniformly." Customers do not need to apply for these changes, CCTV reported further.
Seeking Solutions
Potential fiscal stimulus measures in China have been the focus of speculation on global financial markets since September. At that time, the Politburo, the highest leadership of the Communist Party, demonstrated a sense of urgency in the face of mounting economic challenges in China following a meeting.
Chinese stocks then reached two annual highs and skyrocketed by 25 percent within a few days after the meeting. However, they stabilized again as details about the government's additional spending plans remained unclear.
At the end of September, the Chinese central bank then introduced the most aggressive monetary support measures for the economy since the COVID-19 pandemic. This included a reduction in mortgage rates to revive the property sector from its severe, multi-year slump. Although the measures have boosted Chinese stock prices, many analysts believe that Beijing must also tackle deeper structural issues such as boosting consumption and over-reliance on debt-financed infrastructure investments.
Especially the property sector in China is in turmoil. This is further compounded by high unemployment among the youth and weak domestic consumption in the country.
Given the economic situation in China, with the real estate sector struggling and high unemployment among the youth, the government is taking drastic measures to revitalize the economy. Finance Minister Li Wei has announced an increase in the issuance of government bonds, aiming to aid low-income people, boost the property market, and replenish state-owned bank reserves.
