The Chinese central bank has lowered the five-year key interest rate, which is crucial for building financing. This is intended to revive demand in the real estate market.
The Chinese state and party leadership wants to support the ailing real estate market. That’s why the Chinese central bank lowered the key interest rate for five-year loans – from 4.2 to 3.95 percent.
The five-year interest rate is important for financing construction projects. According to market observers, the reduction in the key interest rate could strengthen confidence among investors and consumers and lead to more construction loans being taken out again.
High debts of construction companies
It was only last summer that the Chinese central bank lowered this important key interest rate. China’s real estate market has been in deep crisis for some time. Many construction companies are heavily indebted and are sometimes unable to complete their projects.
Demand for new properties has also declined. According to the Bloomberg news agency, in order to promote the granting of loans, state lenders recently provided the equivalent of around 7.7 billion euros for real estate projects.
Crisis is putting a strain on the economy
Not only the weak real estate market, but also subdued foreign demand is weighing on the overall Chinese economy. The International Monetary Fund (IMF) therefore forecast at the beginning of February that Chinese economic growth will slow to 4.6 percent in 2024 and continue to decline in the medium term.
Eva Lamby-Schmitt, ARD Shanghai, tagesschau, February 20, 2024 12:59 p.m