China cut the one-year rate on the People’s Bank of China’s pledged supplementary lending facility by 25 basis points to 1.5%. The central bank also broadened the facility’s eligible uses. Separately, the finance ministry, the PBOC and the National Financial Regulatory Administration jointly announced a nationwide mortgage-interest subsidy for qualifying first-home buyers. Natixis economist Gary Ng described the measures to AP as “a targeted approach with lower funding costs to support selected sectors through policy banks and the real estate sector”.
The mortgage subsidy starts on 1 October 2026 and is initially being implemented for one year. It equals one percentage point a year for as long as five years. It applies to eligible loan principal of up to RMB1 million for homes measuring no more than 120 square metres and priced at no more than RMB1.5 million. The PBOC also raised its relending quota for technology innovation and equipment upgrades by RMB200 billion to RMB1.4 trillion.
TARGETED CREDIT SUPPORT EXPANDS
Pledged supplementary lending provides low-cost central-bank funding to China’s major state policy banks to support state and public projects. The PBOC said the facility will now also support investment in water, power-grid, computing, communications, urban pipeline and logistics networks.
The PBOC also raised the relending quota for agriculture and small businesses by RMB500 billion to RMB4.85 trillion, and the quota for private enterprises by RMB300 billion to RMB1.3 trillion. Caixin said the adjustments underscore Beijing’s strategy of directing targeted financing to key sectors.
PROPERTY AND GROWTH PRESSURES
The Associated Press reported that Chinese home prices had fallen by roughly 20% or more from 2021 levels. It also reported year-on-year economic growth of 4.3% in the second quarter, below the government’s 4.5% to 5% full-year target range. Ng said the measures were likely meant to help China meet its minimum annual growth target, AP reported.
According to estimates cited by Xinhua, the subsidy could cut cumulative interest on a long-term RMB1 million mortgage by nearly RMB50,000.