This is mainly to further reduce borrowing costs and to try and bolster consumption activity. Domestic demand conditions in China have suffered greatly ever since the Covid pandemic and there hasn’t been much of a revival in that area despite the world returning back to normal.
The report says that some banks are already making final preparations for the adjustments on mortgage rates. And the change could go into effect as early as some this month. According to one of the sources, some homeowners may enjoy up to 50 bps of immediate rate reduction.
It’s a big move by Beijing but again, we’ll have to see just how effective this can be. They’ve taken quite a number of steps already in the past year or so but none of which have been too fruitful. At this point, there is a line of thinking that it is more to do with the demographics and mindset when it comes to figuring out China’s economic struggles. And that is what Xi Jinping is also trying to correct and foster with his “common prosperity” drive.