The A-share market rebounded swiftly in late September due to a raft of incremental economic policies. Photo: TUCHONG 

With the launch of a package of incremental policies, strengthened counter-cyclical adjustments in monetary policy, alongside across-the-board reduction of the reserve requirement ratio and substantive interest rate cuts, China is striving to accomplish its economic and social development targets for the year 2024. 

Given that real estate and the stock market are concerned with balance sheet repair of the household and corporate sectors, this round of macro control starts from stabilizing asset prices and easing debt pressure, with emphasis placed on stabilizing housing prices, invigorating the capital market, and optimizing the existing wealth structure of all sectors to rebalance the macro balance sheet. This represents a positive attempt to manage the nation’s macro balance sheet, indicating that macroeconomic governance is shifting from incremental management to a combination of stock and incremental management. Since the end of September 2024, economic and financial indicators, including real estate, the stock market, and consumption, have continued to improve, as have market expectations, significantly boosting economic recovery and growth. 

Positive signs in real estate

The accelerated implementation of a variety of financial measures aimed at the real estate market has shored up confidence among homebuyers and property firms. On the demand side, purchase, sale, and price restrictions have been lifted, and criteria for ordinary and non-ordinary housing have been eliminated to comprehensively lower the bar for housing purchases. Interest rates for housing provident fund loans, minimum down payment ratios, mortgage rates for existing home loans, and the tax burden arising from selling old homes to buy new ones, have been reduced. These measures have substantially encouraged housing purchases, as evidenced by the steady and upward trajectory of property sales since October. Particularly in first-tier cities, the sales of new and second-hand housing have both picked up, with single-week deals reaching the highest level since the beginning of 2024. 

On the supply side, efforts have been made to control incremental housing, optimize the inventory, and improve quality, thereby enhancing property firms’ delivery capacities. On one hand, the expanded amount and scope of financing available for housing projects on a “white list” aims to ease real estate companies’ liquidity pressure. The real estate financing coordination mechanism has achieved preliminary results. By the end of September, commercial banks had approved more than 5,700 white list projects, amounting to 1.43 trillion yuan, which will facilitate the timely delivery of over 4 million housing units. By the end of the year, the credit allocated to white list projects will be increased to 4 trillion yuan. 

On the other hand, through monetized resettlement and other measures, the implementation of new urban village renovations and upgrading of unsafe or dilapidated housing, involving 1 million units, will not only help release additional housing demand and accelerate the absorption of existing inventory but also create better conditions for future housing safety and improvements.

More active capital market 

To facilitate the healthy and steady development of the capital market, the People’s Bank of China introduced two structural monetary policy tools—securities, funds, and insurance swap facilities and special reloans to support listed companies’ buybacks and increase the stock holdings of major shareholders, while considering the establishment of a stock market stabilization fund to increase the intrinsic stability of the capital markets. 

This round of countercyclical control doesn’t solely target the real economy, but also aims to galvanize the capital market, reflecting innovativeness in macroeconomic governance. It can not only bolster confidence and revitalize the economy, but also leverage the wealth effect in spurring consumption and investment.

Due to the combined effects of the incremental policies, the US Federal Reserve’s interest rate cut, and persistent systemic underestimates of domestic assets, the A-share market rebounded swiftly in late September, going from “bear to bull.” This inspiring phenomenon attracted incremental funds such as residents’ savings, bank finance, and foreign investments to the market, considerably increasing trading activity. 

The recovery of the stock market and positive changes in the real estate market generated considerable wealth effects, substantively driving consumption. In particular, residents’ confidence in spending gradually recovered, with the consumer market demonstrating strong vigor. During the National Day holiday, consumption in hotel accommodations, leisure and entertainment, and entrance tickets to scenic spots grew 17.1%, 22.1%, and 1.9%, respectively, year-on-year. Domestic trips and related expenses rose 10.2% and 7.9% from the same period in 2019. Spending per tourist bounced back to 916.1 yuan, marking the highest level since 2019. These trends indicate that consumption potential has been effectively unleased. 

The innovation in macroeconomic governance, emphasizing stock management and asset price enhancement, has played a pivotal role in repairing the balance sheets of both households and corporations, which will fuel positive trends in consumption and investment. With the ongoing impact of this raft of incremental policies, China is on track to achieve its economic and social development objectives for the entire year. 

Zhang Xiaojing (director and research fellow) and Cao Jing (associate research fellow) are from the Institute of Finance and Banking at CASS.

Edited by CHEN MIRONG