The Chinese communist regime’s central bank in recent days cut the long-term loan prime rate (LPR) to a historic low in an attempt to boost the property market amid a slumping economy. However, the Chinese public who have just experienced a stock market crash are skeptical about the cut and remain reluctant to invest in the real estate sector.
The central bank announced on Feb. 20 a cut of the LPR for loans with a maturity of more than 5 years by 25 basis points to 3.95 percent.
This adjustment is the largest interest rate cut since the LPR pricing model was adopted in October 2019. Xie Yifeng, president of the China Urban Real Estate Research Institute, said that this is an “unprecedented rescue move” and indicates that the property market may be about to usher in a new turning point.
Zhang Dawei, chief analyst of Zhongyuan Property in China, said that this interest rate cut will have a significant impact on the real estate market, especially in first- and second-tier cities. He predicted that mortgage interest rates will remain at historic lows over the next three years.
However, the Chinese public believe that these so-called experts are “royal experts” who collaborate with and speak out for special interest groups within the ruling communist party.
One post read, “No one trusts the experts anymore.”
Experts Not Optimistic
Some experts have not been optimistic about mainland China’s real estate market.Cao Dewang, a well-known private entrepreneur, believes that young people in mainland China should avoid taking on excessive mortgage loans. He once predicted that the Chinese real estate market in the future may evolve into a game of music chairs: once no one takes over, the game will stop.
Netizen “Caichangzhu” posted a video on social media on Feb. 21 saying that the cut in mortgage interest rates now is a negative for most people.
He pointed out that as loan interest rates decrease, corresponding bank deposit interest rates also decrease.
He said that the government “continues to print money while lowering deposit interest rates, and the wealth of ordinary people shrinks faster. Moreover, we are not in a period of economic growth, and it is impossible for most people to make up for the shrinkage of their wealth by working. I’m quite panicked.”
On Feb. 23, the CCP’s National Bureau of Statistics released its latest report showing that January’s sale prices for commercial housing in 70 large and medium-sized cities in China continued to fall. The month-on-month price was seen dropping for seven consecutive months, with a decrease of 0.3 percent; the year-on-year decrease was 0.7 percent, the biggest drop in the past 10 months.
Wang Guo-chen, assistant researcher at The Chung-Hua Institution for Economic Research in Taiwan, told The Epoch Times on Feb. 22 that this loan interest rate cut is related to China’s stock market crash.
Little Effect on Investor Confidence
As to the effect, Mr. Wang said, “I think the effect will be little. Everyone is afraid to buy a property. Whether it’s Evergrande or Country Garden, there were quite a few new top 50 property developers last year that fell into debt defaults, including state-owned real estate enterprises.“The reduction of LPR will not be able to reverse the entire real estate debt. Naturally, the debt cannot be resolved, so I think the subsequent real estate market will be worrisome.”
Meanwhile, the CCP has brought the stock market index back from its lowest point through state intervention, such as banning short-selling while only allowing buying. This has continued to hurt Chinese investor and consumer confidence in the Chinese economy.
When the Chinese stock market reopened after the week-long Chinese New Year holiday on Wednesday, the CCP’s leader Xi banned short selling at the opening and closing bell. The funds of 200 million Chinese investors continue to be held hostage in the Chinese stock market.
