China’s housing slump deepened last month and triggered new calls for the government to pump cash and credit into the economy, while the central bank yesterday kept a key lending rate unchanged.
Among a slew of data, including industrial production and retail sales, published yesterday, analysts latched onto the bad news from the property market, which has been the biggest drag on China’s economic growth.
Property investments fell 10 percent year-on-year and home sales sank 30.5 percent, while home prices in major, so-called Tier 1 cities like Beijing and Shanghai, fell 3.2 percent, National Bureau of Statistics data showed.
Photo: AFP
“The most disappointing in May’s data is probably that property sales barely saw any improvements even after so many supportive measures,” BNP Paribas SA chief China economist Jacqueline Rong (榮靜) said.
Chinese authorities need to find ways to lower the rates on existing mortgages, closing the gap with the cost of new ones, she said.
The People’s Bank of China kept a key interest rate unchanged for the 10th straight month.
Economists say the bank’s room to cut rates is constrained by the need to prop up the yuan, which faces downward pressure as the US Federal Reserve reinforces its high-for-longer message.
Late last month, China unveiled a broad rescue package to prop up housing sales as a credit crisis was engulfing some of the nation’s biggest real-estate developers.
It relaxed mortgage rules and encouraged local governments to buy unsold homes. Many investors and analysts have cautioned that the financial incentives are not big enough and trial programs in several cities have shown progress can be slow.
Subdued demand at home and the deteriorating foreign trade environment are weighing on business confidence, discouraging companies from investing and driving some to move production overseas. Credit growth has been lackluster and the M1 money supply gauge contracted last month at the fastest rate in data going back to 1996.
“We still need to see new stimulus coming in,” Bank of America Greater China chief economist Helen Qiao (喬虹) said in a Bloomberg TV interview.
“Otherwise the growth momentum could very much weaken,” she added.
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