BEIJING/HONG KONG- China stepped up measures to boost the country’s faltering economy with top banks paving the way for further cuts in lending rates and sources saying Beijing plans further action including relaxing home-purchase restrictions.
As part of those measures, the authorities also cut the amount of funds institutions need to hold in foreign exchange reserves. The measures cheered investors, and analysts said they should prevent a further downturn in the ailing property sector.
China is grappling with a slowdown that has rattled global markets, with the spotlight now firmly focused on troubled developer Country Garden’s spiraling debt crisis in a sector that contributes to roughly a quarter of the economy.
As pressure mounts, the authorities have rolled out a series of measures to spur the economy and revive the property market, with steps including the easing of some borrowing rules and a cut to the amount of forex banks must hold as reserves.
The country is set to take further action including relaxing home-purchase restrictions, four people familiar with the matter said.
Regulators including the housing ministry, central bank and financial regulator in coming weeks will implement measures they have been working on over the past few months under State Council guidance, two of the people said.
ANZ’s senior China economist Betty Wang said several nation-wide property easing measures in the past couple of weeks have exceeded market expectations.
“This is the first time since 2021 that China has announced a series of nationwide property easing measures. They will help restore market confidence and prevent the sector from declining further.”
In the near term, however, market sentiment will be swayed by the outcome of a crucial test of investor confidence in Country Garden.
On Thursday, Country Garden delayed a deadline for creditors to vote on whether to postpone payments for an onshore 3.9 billion yuan ($537 million) private bond until Friday 1400GMT to give bondholders “sufficient time” to prepare for the vote.
Ahead of the voting result on Friday, some onshore creditors of that private Country Garden bond received interest payments, sources with direct knowledge of the matter said.
They declined to be named as they were not authorized to speak to the media.
Country Garden declined to comment.
Friday’s vote is a key hurdle Country Garden faces as it strives to avoid default, with one holder of the developer’s dollar bonds saying if the company cannot extend its domestic debt, it will be unable to service external bondholders.
“This has been a slow-moving car crash,” said the bondholder, who declined to be identified due to the sensitivity of the issue, adding that concerns centered around uncertainty over the broader economy and tensions with Washington.
“Everything they do right now is going to have an impact five to 10 years down the line.”
Country Garden, China’s largest private developer by sales, did not immediately respond to Reuters request for comment.
Stress in the property market has intensified pressure on Beijing to implement supporting measures and fanned concern about the ability of policymakers to arrest a decline in China’s broader economic growth. – Reuters
