Xi Jinping’s government has taken its most aggressive measures yet to rescue China’s struggling real estate market.
On Thursday, Beijing announced a new plan that included relaxing mortgage rules and urging local governments to buy unsold homes, reflecting increased authorities’ concerns about the sector’s impact on economic growth.
The support package included several key components intended to revive the housing market. First-time homebuyers will benefit from reduced down payment requirements of 15%, while second home purchases only require 25%. In addition, the central bank is providing 300 billion yuan ($42 billion) in financing to help government-backed companies acquire excess inventory from developers, which will then be converted into affordable housing.
China’s Finance Ministry held the auction for the first batch of its special government bonds on Friday, marking the start of a long-awaited stimulus program.
Zhu Ning, professor of finance at the Shanghai Advanced Institute of Finance, was interviewed by Bloomberg TV and said the current measures were somewhat similar to the bailouts of financial institutions during the Great Financial Crisis. He noted that without direct intervention and lending by the central government to the real estate market, it was too early to consider the crisis resolved.
In related news, recent data shows that China’s industrial production grew 6.7% year-on-year in April 2024, beating market forecasts of 5.5% and accelerating from a 4.5% increase in the previous month. Despite sluggish retail sales, which marked the weakest growth since July 2023, China’s unemployment rate fell to 5.0% in April 2024. This was the lowest rate since November 2023 and better than both the previous month and market estimates of 5.2 %.
Chinese stocks and proxies are rising
Stocks and commodities linked to China rallied on the news, reflecting positive investor sentiment following the government measures.
The onshore Shanghai Composite Index rose 1% to close at 3,154, while the Shenzhen Component Index rose 1.1% to 9,709.
Struggling real estate developers made significant gains Greenlandic companies, Poly Real Estate And Chinese fortune increased by more than 10% in one day.
The Hang Seng Index rose 0.91% and reached the highest level in nine and a half months. At the head of the charge was the property developer Country Garden Services Companies And Ping an insurancewhich rose by 9% and 5% respectively.
Chinese-American stock certificates (ADR) also moved slightly higher on the US market on Friday.
Alibaba Group Holdings Ltd (NYSE:BABA) and PDD Holdings Inc. (NYSE:PDD) rose 0.5% and 0.9% respectively.
Thursday is the KraneShares CSI China Internet ETF (NYSE:KWEB), which provides exposure to Chinese technology stocks, rose 2.7% to reach its highest level since February 2023.
Copper, one of the commodities most sensitive to China’s economy, rose nearly 3% to $5 a pound, marking its strongest session since early April and hitting new all-time highs.
Chart: Copper reaches $5 per pound and sets new all-time highs
Read now: ‘Big Short’ investor Michael Burry bets heavily on gold and renewable energy stocks, leaves Amazon and Alphabet
This image was created using MidJourney artificial intelligence.
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This article China Goes All-In as Beijing Vows to Buy Unsold Properties: Chinese Stocks Rise, Copper Hits Record Highs originally appeared on Benzinga.com
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