China’s economy faces increasing challenges, leading the central bank to take action with the first interest rate cut since August. The move comes as expectations grow for additional stimulus aimed at reviving struggling sectors, particularly the property market.
Official data released on Thursday revealed a more pronounced decline in property investment during the period of January to May, with a 7.2% drop compared to the same period the previous year. This further deepens concerns regarding the future prospects of the world’s second-largest economy. The latest figure surpasses the 6.2% annual decrease recorded in the preceding period of January to April. Moreover, data from the National Bureau of Statistics (NBS) indicates a 0.9% decrease in property sales by floor area, compared to a 0.4% decline in the first four months.
In addition, Bloomberg reported China witnessed the slowest growth in home prices in four months. According to data from the National Bureau of Statistics released on Thursday, new-home prices in 70 cities (excluding state-subsidized housing) saw a 0.1% increase last month compared to a growth of 0.32% in April. The secondary market experienced a decline of 0.23%, ending three consecutive months of gains.
In this context, analysts noted that due to the ongoing decline in the property sector, policymakers may be compelled to implement additional supportive measures as early as June. The objective would be to stimulate “reasonable” housing demand and enhance market confidence, as mentioned in the China Securities Journal.
Meanwhile, growth in industrial output, FAI and retail sales slowed in May, raising pressure on official to implement braoder measures to support economic activity. According to a commentary in the Economic Daily, China should implement measures to bolster its economy due to the increasingly challenging and intricate external circumstances. The commentary highlights that domestic demand remains insufficient, and private investment is relatively feeble. It emphasizes the importance of sustaining robust macroeconomic policies, maintaining a proactive approach to stimulating demand, and offering stronger support to the real economy.
Lastly, during a briefing, Shu Jueting, a spokesperson for China’s Ministry of Commerce, announced that a range of initiatives will be implemented to bolster the revival and growth of consumer spending.
