China to inject $137Billion of new، cheap funds to boost housing market

China is planning to allocate at least 1 trillion yuan ($137 billion) in low cost financing to support the nation’s urban village renovation and affordable housing programs so as to aim at bolstering the struggling property market، which has been impacted by a significant downturn in its latest effort to shore up the struggling property market، and the funds will be injected in phases through policy banks، ultimately benefiting households looking to purchase homes.

The People’s Bank of China would inject funds in phases through policy banks with the money ultimately trickling down to households for home purchases، officials are considering options including the so-called Pledged Supplemental Lending and special loans، the people said، adding that the government may take the first step as soon as this month. 

China approved the issuance of an additional 1 trillion yuan worth of sovereign bonds 

Bloomberg News Agency reported that China at the end of October approved the issuance of an additional 1 trillion yuan ($137 billion) worth of sovereign bonds this year to fund projects geared toward disaster relief and climate and that will likely help investment in the coming months.

China plans to provide at least $137 billion of low-cost financing to the nation’s urban village renovation and affordable housing programs in its latest effort to shore up the struggling property market as China’s innovative plan is to revive the property market.

China unveiled a groundbreaking strategy to bolster the struggling property market

China has unveiled a groundbreaking strategy to bolster the struggling property market by providing low-cost financing to urban village renovation and affordable housing programs. Under this ambitious initiative led by Vice Premier He Lifeng، the Chinese government plans to inject a minimum of 1 trillion yuan ($137 billion) into these projects، while this move aims to stimulate economic growth، restore consumer confidence، and address the significant property downturn that has been plaguing the nation.

The People’s Bank of China will channel the funds through policy banks، ensuring that the money reaches households for home purchases and various options are being considered، including Pledged Supplemental Lending and special loans، with the government potentially taking the first step this month to implement this plan. 

China to provide developers with low-cost funds

Dubbed by some as “helicopter money،” the financial approach known as Pledged Supplemental Lending (PSL) allows the China central bank to provide developers involved in shantytown renovations projects with low-cost funds through policy and commercial lenders، then the developers  use the money to buy land from local governments، which in turn give cash subsidies to households whose old homes were demolished so they can purchase newly-built or existing apartments، driving up demand in the property market. 

These developers can then acquire land from local governments، who، in turn، offer cash subsidies to households whose old homes were demolished، while this process generates increased demand for newly-built or existing apartments.

Critics have raised concerns about the PSL program influence in inflating real estate bubbles

While critics have raised concerns about the PSL program، citing its influence in inflating real estate bubbles in lower-tier cities، economic experts believe that this latest initiative will lead to more balanced and sustainable long-term growth as Bruce Pang، the Chief economist for Greater China at Jones Lang LaSalle Inc.، predicts that the funding boost will incentivize private investment in the property and construction sectors، potentially generating over 10 trillion yuan in direct investment overall.

China’s innovative approach to tackling the property market crisis comes on the heels of unconventional fiscal stimuli، including raising the budget deficit through the issuance of 1 trillion yuan in sovereign bonds last month، as the world’s second-largest economy، China continues to navigate a challenging recovery path، and the success of these initiatives holds the key to sustained economic momentum and progress.

China’s plan to save  the biggest property downturn in decades

China’s plan، part of a new initiative by Vice Premier He Lifeng، would mark a major step-up in authorities’ effort to put a floor under the biggest property downturn in decades، which has weighed on economic growth and consumer confidence as well as market concerns are mounting over the financial health of the nation’s largest developers after several of them have fallen into default. 

The latest plan comes as Beijing announced an unconventional fiscal stimulus last month، including raising the budget deficit with the issuance of additional 1 trillion yuan of sovereign bonds as the world’s second-largest economy is still on a bumpy recovery path despite an improvement in the third quarter but it is expected to show economic momentum faltered in October even though headline numbers will likely look good relative to last year.

China’s low-cost financing aims to support the struggling property market

China’s low-cost financing aims to support the struggling property market and provide affordable housing options through the renovation of urban villages and it helps stabilize the economy، boost consumer confidence، and address the large downturn in the property market.

On the monetary policy side، the central bank’s options to help the economy are fairly limited given yuan weakness and pressures on capital outflows: Policymakers are expected to hold steady a key policy interest rate this week، though they may inject more cash into the financial system and they may also soon cut the amount of cash banks have to keep in reserve in a bid to keep liquidity ample.