6/22/2023: China Banks Lower Borrowing Rates
China's recovery post covid is slower than expected
The one-year loan prime rate offered by China banks was lowered to 3.55% from 3.65%, while the five-year rate—typically used to price mortgages—was cut to 4.2% from 4.3%, the People’s Bank of China said Tuesday. Beijing is also considering issuing special treasury bonds worth $140B, to help fund new infrastructure investment and relaxed rules to encourage people to buy more than one home in the hope of sparking a turnaround of China’s beaten-down real-estate market.
In essence, demand is anemic in China. My family owns a factory in Southern China and from their field research, the real estate bust is really hurting the economy. Many local governments could no longer auction land to raise revenue and people are not getting into more debt to buy houses. Businesses are holding back their hiring plans so the youth unemployment rate has hit a record high. It feels increasingly more like a crisis of confidence. An economist from Nomura even saidChina is on a similar path as Japan in the 1990s. For my current visit to Taiwan, I also don’t see tourists from China any more. (It was people mountain, people sea back in 2018.) My brother told me that China makes it much harder for their citizens to travel abroad, not to mention getting money out of China has always been a challenge. It seems China needs to address a lot of its internal issues, just like the USA. It surely will be more productive for these two countries to leave each other alone and focus on fixing problems for their citizens.