China's Measures to Revive Slowing Economy: Cuts, Cash, Credit

This week, China has revealed a host of new measures aimed at revitalizing its struggling economy. The world's second-largest economy is facing unprecedented challenges, including a crisis in the property sector and sluggish consumer spending. These difficulties have prompted calls for greater state support to help China get back on track and meet growth targets set for 2024. 
 
Among the steps announced by Beijing this week are rate cuts. On Wednesday, the People's Bank of China reduced its medium-term lending facility—the interest rate charged on one-year loans to financial institutions—from 2.3 percent to 2.0 percent. This move follows an announcement two days earlier that monetary policymakers would decrease China's 14-day lending rate. 
 
These decisions led most Asian markets to rise and are viewed as some of Beijing’s boldest moves in recent years towards reviving economic activity within its borders. 
 
However, Ting Lu, chief China economist at Nomura, expressed doubts about these initiatives’ effectiveness despite their boldness. 
 
Additionally, there was also an injection of cash into the system, with Friday seeing another significant decision from China’s central bank; it cut down the reserve requirement ratio, dictating how much cash banks must keep on hand, hoping that this will increase lending to companies and consumers alike. 
 
The reduction is expected to inject approximately a trillion yuan ($141.7 billion) in long-term liquidity into the Chinese financial market, which could provide some relief given current pressures faced by sectors like housing, where home sales volume has been steadily declining throughout this year. 
 
In response to such problems, Tuesday saw Pan announce lower interest rates on existing mortgage loans, benefiting around 150 million people across the country, according to his estimates. 
Chaoping Zhu of JP Morgan Asset Management pointed out that lower mortgage rates might enable households with more disposable income, potentially leading to a recovery in consumption levels. 
  
Further potential stimulus came when Pan proposed minimum down payments for first-time buyers and second homes be "unified," resulting in the latter dropping from 25 percent to 15 percent. 
 
ANZ Research commented that these measures should be "sufficient" for China to achieve a growth of 4.9 percent this year. However, they also pointed out that these steps might still be inadequate and too late considering ongoing property market struggles. 
  
Thursday saw Beijing's Politburo convene, acknowledging new economic "problems" but pledging further improvements in policy measures’ focus and effectiveness. 
Harry Murphy Cruise from Moody's Analytics noted how these new supports show increasing concerns about China’s economic health. 
 
Bloomberg reported on Thursday that officials are contemplating injecting more than $140 billion into large state-run banks, marking the first significant capital injection since the global financial crisis of 2008. The measure intends to give banks more lending capacity, which would primarily be implemented through issuing "new special sovereign bonds." 
 
These steps taken by China reveal a determined effort towards addressing its current economic issues and reflect an urgency within its government structures regarding such matters.