Editorial | For China, boosting the property sector is only a short-term fix
- Key lending rates have been cut, but in the long run the government still wants to direct resources and capital towards productive activities like manufacturing
The lowering of two benchmark lending rates by China’s central bank, including one for property mortgages, is unlikely to be the end of policy easing. The latest data reflects a faltering post-Covid-19 economic comeback.
A lot of hiccups are still to be expected on the road to recovery, amid reduced global demand and supply-chain disruptions that have weighed on foreign trade.
Disappointing trade figures for major exporting countries show this is not confined to China. The trading environment is likely to be difficult for the rest of this year, because demand, particularly from the West, remains weak.
That means China will need to find a new growth engine for economic expansion. Domestic consumption is also relatively weak. Many people say one reason is a property-market slump.
This market is important to wider demand in another sense, because many local governments rely on land sales for revenue that finances infrastructure investment and services.
Partly because of the property slump, local government debt levels remain worrying. In other words, in the short term, if the government is to really stimulate the economy, as many expect, it will need to give the property sector some support.