China seeks to bolster its economic growth - potential advantages for Germany
China's economic situation has been facing challenges for some time now, causing a strain on its performance. The central bank has decided to intervene, pouring billions into the economy as a form of aid. This move prompted a positive response from stock markets worldwide. Some analysts propose that these steps may benefits Germany's exports as well.
The central bank's governor, Pan Gongsheng, announced plans to lower interest rates on existing real estate loans in Beijing, along with reducing the down payment requirement for a second home loan from 25% to 15%. Banks are also required to hold less cash, injecting roughly 125.5 billion euros into the market, thereby increasing liquidity.
These measures were met with favorable reactions. The DAX began its journey in the green, nearing a new record high. "China is not just a significant market for German car sales, but in general, Germany's exports benefit from Beijing's actions. The positive news is strengthening economic optimism, especially when Germany's economy is currently struggling, and export prospects to the East are improving," stated CMC.
The Euro-Stoxx-50 is exhibiting robust growth, driven by strong stocks within the resource sector. China being the largest market for raw materials, this sector is significantly benefiting. The stock market in Shanghai and the index of the most significant companies in Shanghai and Shenzhen both surged by approximately four percent following the announcements. The Nikkei index in Tokyo also saw an increase of 0.6% to a three-week high after a long weekend break.
Kyle Rodda, an analyst at Capital.com, commented, "These seem like very bold steps from the authorities. Overall, it's an extremely optimistic situation for investors." Vasu Menon, an investment expert at OCBC, however, suggested, "To truly help the economy recover and to effectively overcome the real estate crisis, it's likely that more than just monetary policy will be required. Bolder easing measures may be implemented in the coming quarters."
Confidence in China's economy is currently low, with low inflation suppressing consumer spending. "Individuals are postponing purchases, anticipating price drops. This is toxic for an economy that has built up so much capacity, expecting the opposite to happen," argued CMC experts.
The central bank is responsible for both monetary and fiscal policy in China. Its objective is to support steady economic growth in the world's second-largest economy, as reported by the state-owned "People's Daily." The central bank is taking action as concerns grow that China may miss its targeted growth rate of around five percent.
An ongoing real estate crisis in the country is putting pressure on economic performance. So far, a state-backed program to buy empty homes has shown little effect. The crisis within this sector, which had previously been a major growth driver, is also playing a role in weak consumer spending in China.
The central bank's decision to lower interest rates and reduce down payment requirements for second home loans is seen as beneficial not only for China's economy but also for other nations, such as Germany, due to potential increases in exports.
The positive responses from stock markets worldwide, including the DAX in Germany, can be attributed to the belief that China's economic recovery will also positively impact other economies, such as Germany, that have strong export relations with China.
