A man looks at his smartphone as he walks past the People’s Bank of China building on May 20, 2022 in Beijing.
Jiang Qiming | China News Service | Getty Images
While the LPR cut may provide short-term relief, the liquidity relief alone is unlikely to lead to a turnaround in the housing market.
Positive reactions to last week’s rate changes were short-lived, said analysts such as Navigate Commodities CEO Atilla Widnell.
“Further monetary easing/stimulus was seen as futile as ‘flogging a dead horse,’ given that China’s economy desperately needs consumers back on the streets to spend money,” he said in a note.
In relation to the latest round of cuts, David Chao, Invesco’s Asia Pacific (ex-Japan) global market strategist said it hinted at the severity of the downturn in the property market.
However, he has admitted that these cuts will not be enough to boost liquidity.
“It sends a strong message that policymakers are ready to take stronger action to stabilize the struggling market,” he said in a note.
“While the LPR cut may provide short-term relief, the liquidity relief alone is unlikely to lead to a turnaround in the housing market.”
He added that lower mortgage rates have so far not translated into higher property sales, “due to a lack of confidence in large developers and the pre-sale model”.
Chao said he does not expect these to be the last monetary policy corrections to come from Chinese authorities, especially when “the central and local governments have the financial tools to provide an excess of 3 trillion yuan to boost the real estate sector.”
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