The recent weeks have seen China intensify its measures to support the economy and stabilize the markets, shedding light on concerns regarding the hindered recovery due to the real estate crisis, contraction, and weakened consumer confidence, as reported by Bloomberg.
These measures include injecting more long-term cash for banks, tightening selling rules on margin trading, and expanding the scope of real estate developers’ access to loans. However, investors may need to see more actions to regain their confidence in the Chinese markets, according to the agency.
The CSI 300 Index has dropped by about 4% so far in 2024, trading near its lowest level in 5 years. The Yuan has also joined most other depreciating Asian currencies this year, while the yields on government bonds have reached their lowest levels in almost 22 years today, amid bets on further monetary easing.
Additional assistance for the economy may be necessary if the Chinese government aims to declare an ambitious expansion target this year, at the National People’s Congress in March. Many Chinese provinces are targeting a 5% or higher growth in the Gross Domestic Product for 2024. Economists already anticipate a somewhat ambitious goal, and these measures have been announced by China to support its economy and calm investors since the beginning of the year, according to Bloomberg.
January 28: Restrictions on Securities Lending
Securities regulators stated that they would cease lending certain stocks for short selling, in the latest attempt to curb the stock market decline, thus preventing strategic investors, who typically refer to listed shareholders, from lending stocks during agreed-upon insurance periods.
January 27: Real Estate Easing
Guangzhou, one of China’s largest cities, relaxed restrictions on home purchases in an attempt to halt price declines, while Beijing and Shanghai have reduced down payment requirements since last November.
January 26: Support for Real Estate Developers
The Ministry of Housing and Urban-Rural Development announced that it would provide a list of qualified housing projects to receive financial support by the end of this month, in the latest effort to boost real estate lending to slow down the sector’s decline.
The National Financial Regulation Administration urged banks to support qualified developer requests, including extending current loans and adjusting repayment arrangements.
January 24: Reduction in Reserve Ratio, Real Estate Loans
People’s Bank of China Governor Pan Gongsheng stated that the central bank would lower the required reserve ratio by 0.5% on February 5, releasing a trillion Yuan (139 billion dollars) of long-term liquidity into the market.
This announcement followed official data showing that the country’s economy still faces significant challenges, marking the largest reduction in the required reserve ratio since 2021.
On the same day, the authorities in China and Hong Kong announced steps to deepen financial ties, including facilitating property purchases and expanding a program allowing personal investments in the Greater Bay Area, home to a population of 70 million and including Hong Kong and major cities in the southern mainland, such as Shenzhen and Guangzhou.
January 23: Stock Rescue Package
Bloomberg reported that officials are considering using around 2 trillion Yuan (281.6 billion dollars), most of which is from offshore accounts of state-owned Chinese companies, as part of a stability fund to purchase local stocks through the Hong Kong stock exchange. They have allocated at least 300 billion Yuan (42.24 billion dollars) of local funds for investing in local stocks.
January 19: State Buying Signs
Total trading volume in some of the country’s largest traded funds, typically monitored for state-led buying signs, was the third largest weekly total ever, the largest since July 2015.
January 16: Special Sovereign Bonds
Bloomberg mentioned that China is considering issuing new debts worth 1 trillion Yuan (140.8 billion dollars) under what is known as the special sovereign bonds plan, which discussed by policy makers includes selling long-term sovereign bonds to finance projects related to food, energy, supply chains, and urban expansion.
January 5: Rental Housing Development
The People’s Bank of China and the National Development and Reform Commission published guidelines for financial support to develop the rental housing market, including a policy to encourage banks to provide loans for developers, industrial areas, and some rural organizations and companies to build new homes for long-term rental.
