China’s major banks to cut existing mortgage rates

China’s major banks are expected to cut existing mortgage rates by up to 30 basis points starting on October 25th, 2024.

This rate cut is part of broader policy efforts to revive China’s struggling real estate sector. Due to challenges in the real estate sector amid declining property prices and a wave of developer bankruptcies, China isn’t expected to meet its 5 percent GDP growth target this year. The real estate sector is deeply interconnected with multiple industries and the financial system, making its recovery essential for broader economic stability. However, this modest rate cut is unlikely to provide the immediate stimulus needed to reverse the ongoing downturn in the property market.

In the short term, the reduction is insufficient to produce meaningful economic relief, as a much stronger stimulus package is required to generate tangible results. At best, China’s property market may stabilize temporarily before facing further declines. Over the medium to long term, China’s economy faces structural challenges compounded by geopolitical risks. These issues go beyond fiscal or monetary policy solutions, and no foreign assistance can effectively address them due to the scale of China’s economy. Moreover, the root causes of China’s economic instability are largely political, with domestic consumers and international partners increasingly skeptical of the country’s future under its current leadership.