China Unveils Fresh Stimulus to Shore Up Property Sector and Growth
China announced new measures to support its economy and property sector, including a PSL rate cut, expanded tech relending, and mortgage subsidies.
China on Tuesday announced a set of measures aimed at supporting its economy and a property sector that continues to face significant pressure, as authorities work toward the government's annual growth target.
The People's Bank of China said it will reduce the interest rate on its pledged supplementary lending (PSL) facility by a quarter of a percentage point, bringing the one-year rate to 1.5%. PSL provides low-cost financing to major state policy banks for state and public projects. The central bank said the cut is intended to better incentivize banks and serve national strategies.
In a separate move, the central bank will raise the quota for relending aimed at technological innovation by 200 billion yuan, bringing the total to 1.4 trillion yuan.
The Ministry of Finance also announced new mortgage interest subsidies for homebuyers. Starting in October, eligible first-time buyers can receive subsidies equivalent to an annualized rate of 1 percentage point on the mortgage principal, for up to five years. To qualify, the property must have a floor area of no more than 120 square meters and a price of up to 1.5 million yuan.
Gary Ng, a senior economist for Asia Pacific at Natixis, described the measures as a targeted approach using lower funding costs to support selected sectors through policy banks and the real estate market. For property, he said, the aim is to support housing demand in lower-tier cities that are still facing severe headwinds.
Chinese leaders are targeting growth of 4.5% to 5% for the whole of 2026, slower than last year's 5% expansion. In the April-June quarter, the economy slowed to 4.3% growth, the weakest pace in more than three years.
The property sector has been under prolonged strain following a liquidity crunch that set in after officials cracked down on excessive borrowing, with overall home prices falling by roughly 20% or more compared with 2021. Ng said Tuesday's measures are likely intended to help China meet the minimum annual growth target.
The announcements followed a State Council discussion on Monday on strengthening and improving the effectiveness of macro policies in response to economic challenges.