To salvage the crippled economy, China has recently introduced a raft of measures, including a thrust for banks to increase lending. It has also encouraged banks to decrease mortgage rates and advocated for property financing to be stabilized.

However, according to an analysis by Bloomberg, these elevations may not be sufficient to stimulate economic growth.

Tentative housing need

In the first two weeks of May, sales of residential homes in 50 main cities tracked by China Real Estate Information Corp. reached 131.5 billion yuan, 19,6 billion dollars, down 64% from a year ago.

This month, China’s central bank has already cut mortgage rates to a new low, with banks lowering their five-year lending rates, resulting in a 35-basis-point drop in house loan rates.

Not to mention officials have promised that they would assist reasonable housing demands, and localities are cutting mortgage rates.

CRIC analysts said in a May report that housing demand would not be instantly boosted. 

They explained, “Buyers are unsure whether developers can deliver the projects on schedule, whether home prices will drop, and if they’ll be able to continue repaying mortgages. The resurgence of the outbreak has dampened residents’ expectations of stable income.”

COVID-zero anxiety

The outlet reminded us that China’s loan growth in April slumped to the worst level unseen in five years. Financial institutions made only 645 billion yuan (94.9 billion dollars) in new loans, down from 3.1 trillion yuan in March. Anticipations for May are also gloomy as per several indicators.

China’s loyalty to its zero-COVID policy plays a key role in this mayhem. In the metropolis of Shanghai, suspended businesses had been forced to lay off workers and accept a drop in revenue and earnings. Companies have also halted their intention to expand businesses.

Xing Zhaopeng, the senior China strategist at ANZ, said, “The sluggish credit demand points to worsening expectations among market entities and slowing business expansion.”

China announced 33 steps to stabilize the economy, mainly in the form of tax cuts, fee reductions, and subsidy increases.

Iris Pang, chief economist for Greater China at ING, viewed that the stimulus wasn’t insignificant,” = but the harshness of future pandemic curbs will determine its influence.

Iris told Al Jazeera, “It is at least 3.76 percent of the gross domestic product in 2022. Whether this is enough depends on how flexible coming lockdowns will be.”

Gary Ng, a senior economist at Natixis in Hong Kong, expected that China’s fiscal stimulus wouldn’t achieve the much-desired outcome this time with zero-COVID still present.

Ng said, “In a way, the success story of China back in 2020 depends not only on the supportive fiscal stimulus but also on the looser mobility restriction after the early containment of the virus.”

Ng expected that as long as China continues to cling to its zero-COVID strategy, corporates would still be reluctant to invest, and households would still be unwilling to spend.

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