China is fighting the real estate crisis

Beijing The People’s Bank of China (PBOC) put global markets in good spirits with an interest rate decision on Friday. It cut the rate on five-year loans (LPR) more than expected by 15 basis points to 4.45 percent – the biggest cut since 2019. The rate is affecting mortgages in the world’s second largest economy and is expected to support China’s troubled real estate market .

The industry has been in crisis since the beginning of a deep reform of the Chinese real estate sector, which has been going on for around a year and a half. This is also a problem for the overall economy, for which the sector is an important pillar. Depending on the estimate, the industry directly and indirectly accounts for a quarter to a third of economic output.

The Chinese government has therefore been trying to take countermeasures and stabilize the market since the end of 2021. For example, certain homebuyers are subsidized, mortgage rates are lower, and down payments are lower.