The global stimulus train is gearing up to depart. Japan, currently in recession, is on the verge of announcing a substantial $150 billion fiscal stimulus package, while its increasingly belligerent neighbor, China, is also preparing to inject funds into its economy.
In an effort to revive its stagnant property market, China is exploring various measures as it enters its sixth year of contraction. Policymakers are considering initiatives such as providing mortgage subsidies to new homebuyers nationwide, increasing income tax rebates for mortgage borrowers, and reducing home transaction costs. Ultimately, China is expected to follow the standard playbook of boosting demand by distributing checks directly to consumers.
While these steps may provide a temporary boost, they may not fully address the underlying supply-demand imbalance in the property market. Despite the efforts to attract homebuyers with subsidized interest costs on new mortgages, the effectiveness of these measures remains uncertain.
The Chinese stimulus plan has been in the works for some time, with discussions intensifying as the housing market downturn persists. However, the exact timing and specific policies to be implemented are still up in the air.
As China grapples with its real estate woes, concerns have been raised about the potential impact on banks’ asset quality, particularly as bad loans have reached record levels. To stimulate household spending, China has already begun offering interest subsidies on consumer loans.
With calls for more robust support for the property market growing louder, China faces a challenging road ahead as it seeks to stabilize prices and boost consumer confidence. Despite previous measures to lower borrowing costs and relax homebuying restrictions, the property market continues to face significant challenges.
As China navigates its economic challenges, the government is expected to focus on policy support in the coming months to address the weaknesses in the property and investment sectors. While this year’s growth targets remain achievable, sustained efforts will be needed to drive long-term recovery.