### Summary
China's central bank, the People's Bank of China (PBOC), has announced that it will coordinate financial support to address local government debt problems, as concerns grow over the spillover effects of the country's property crisis on its financial system.
### Facts
- 🏢 China's central bank, the PBOC, will coordinate financial support to resolve local government debt problems as the country's economy faces downward pressure.
- 📉 China unexpectedly lowered interest rates last week to boost economic activity, but analysts believe that more forceful measures are needed.
- 💰 Financial departments are urged to support local debt risk resolution, enhance debt risk prevention and resolution tools, strengthen risk monitoring, and prevent systemic risk.
- 📝 China's Politburo has stated its focus on preventing local government debt risks, but no specific plans have been announced yet.
- 💸 Analysts believe that a coordinated rescue package may involve additional funding, refinancing channels, debt swaps and extensions, and possible debt restructurings.
- 💼 Debt-laden municipalities pose a significant risk to China's economy due to over-investment in infrastructure, plummeting returns from land sales, and high costs related to COVID-19 containment.
- 🏦 The PBOC meeting also emphasized the need for banks to increase lending and support the real economy, particularly the property sector, small firms, technology innovation, and the manufacturing sector.
- 💳 However, consumers and businesses may not be willing to spend or borrow given the uncertain economic climate.
- 💸 New bank lending in China fell to a 14-year low in July.
### Summary
China's central bank has announced that it will coordinate financial support to address local government debt issues, aiming to stabilize the economy and reassure investors amidst concerns of a property crisis spillover.
### Facts
- 🏦 China's central bank, the People's Bank of China (PBOC), will coordinate financial support to resolve local government debt risks.
- 🏢 China's property crisis is deepening and posing risks to the financial system.
- 💰 China unexpectedly lowered key interest rates and is expected to cut prime loan rates on Monday.
- 💼 Financial departments are urged to coordinate support, prevent debt risks, strengthen risk monitoring, and avoid systemic risk.
- 📜 China's Politburo has reiterated its focus on preventing local government debt risks.
- 💸 Bloomberg reported that China plans to offer local governments a combined 1 trillion yuan ($137 billion) in bond issuance quotas for refinancing.
- 🔍 Analysts suggest a coordinated rescue package could involve additional funding, refinancing channels, debt swaps, payment extensions, and debt restructurings.
- 💵 Debt-laden municipalities represent a major risk to China's economy and financial stability.
- 📉 The property sector slump has worsened local government finances and caused developers to default on debts.
- 🤝 Fitch Ratings expects the central government to avoid outright bailouts to maintain debt reduction efforts.
- 👥 The joint meeting attended by PBOC officials urges banks to increase lending for the real economy.
- 💳 The PBOC will optimize credit policies for the property sector and strongly support small firms, technology innovation, and the manufacturing sector.
- 💼 Many consumers and companies are reluctant to spend or borrow due to the uncertain economic climate.
- 📉 New bank lending in China fell to a 14-year low in July.
### Summary
China's central bank will coordinate financial support to address local government debt problems and prevent systemic risk, as concerns grow over the impact of the country's property crisis on the financial system.
### Facts
- China's central bank, the People's Bank of China (PBOC), will coordinate financial support and tools to prevent and resolve local government debt risks.
- China's deepening property crisis has raised concerns of a spillover into the financial system.
- China unexpectedly lowered interest rates last week and is expected to cut prime loan rates to stimulate economic activity.
- The Politburo has emphasized its focus on preventing local government debt risks but has not announced specific plans yet.
- China may offer local governments 1 trillion yuan ($137 billion) in bond issuance quotas for refinancing.
- A coordinated rescue package could involve additional funding, debt swaps, payment extensions, and debt restructurings.
- Debt-laden municipalities pose a major risk to China's economy and financial stability.
- Fitch Ratings expects the central government to avoid outright bailouts of troubled municipalities.
- The central bank urged banks to increase lending and optimize credit policies for the property sector, small firms, technology innovation, and the manufacturing sector.
- However, consumer and company spending and borrowing remain low due to economic uncertainty.
- New bank lending in July fell to a 14-year low.
### Summary
Chinese financial regulators have promised to implement additional measures to address the challenges posed by local government debt and the struggling property sector, which is currently one of the largest risks to the country's economy.
### Facts
- 🏢 Chinese financial regulators are determined to tackle the issues surrounding local government debt and the property sector.
- 📉 The property sector is considered to be one of the major risks to China's economy.
- 🏗️ Country Garden, China's largest private developer, has further added to the woes of the already struggling property sector.
- 📊 Financial agencies have been instructed to coordinate and provide support to local governments in their efforts to mitigate debt risks.
### Summary
House price inflation in Britain slowed in June, with the exception of London, as high mortgage rates deter buyers. Meanwhile, in the US, policymakers are divided over the need for more interest rate hikes, and China's central bank cut a key interest rate due to economic risks.
### Facts
- 💰 Average UK house prices increased by 1.7% in June, down from 1.8% in May, with London being the only region where property prices fell by 0.6%.
- 💸 Policymakers in the US are divided over the need for more interest rate hikes, with "some participants" concerned about the risks of raising rates too far, while "most" officials prioritize battling inflation.
- 🇨🇳 China's central bank unexpectedly cut a key interest rate, the one-year medium-term lending facility (MLF), by 15 basis points to 2.5%, and also lowered the seven-day reverse repo rate to 1.8%.
- 📉 The rate cuts in China were implemented due to a deteriorating property market, weak consumer spending, and sluggish economic data, including trade and consumer price numbers as well as record-low credit growth.
### Summary
The People's Bank of China is expected to cut interest rates in order to calm the nervousness and concern sweeping through the country's financial markets.
### Facts
- 🔍 The People's Bank of China is expected to cut interest rates on Monday.
- 🔒 The Chinese central bank may have to make a big move in order to soothe nervousness in the financial markets.
- 🏦 The Bank of Korea and Bank Indonesia are expected to keep interest rates on hold on Thursday.
- 💼 The Chinese central bank's decision and wider developments around China's markets and economy will dominate investors' thinking this week.
- 💰 The U.S. Federal Reserve's annual Jackson Hole Symposium and the BRICS summit in South Africa will also be closely watched.
- 📉 Chinese economists are slashing their GDP growth forecasts due to deflation, slumping trade activity, and an imploding property sector.
- 💣 The real estate crisis poses a threat to growth and raises questions about the strength of the shadow banking system.
- 📉 Chinese blue chip stocks are down 6% in the last two weeks, and financial conditions are tightest since December.
- 🌍 Global markets are experiencing volatility, with a surging dollar, rising U.S. Treasury yields, and stock markets experiencing vertigo.
- 📈 Key developments to watch on Monday include the China interest rate decision, Thailand GDP for Q2, and Hong Kong inflation for July.
### Summary
China is expected to cut lending benchmarks, including the mortgage reference rate, to revive credit demand and support the struggling property sector.
### Facts
- 🏦 China is predicted to lower lending benchmarks at the monthly fixing, including the loan prime rate (LPR).
- 📉 All participants in a survey of 35 market watchers anticipate cuts to both the one-year LPR and the five-year LPR.
- 📊 The majority of participants expect a 15-basis-point cut to the one-year LPR, while the remaining forecast a 10 bp reduction.
- 📈 Meanwhile, 94% of respondents predict a reduction of at least 15 bp to the five-year LPR, which serves as the mortgage reference rate.
- 💰 Market expectations for further monetary easing are driven by declining credit lending and increasing deflationary pressure.
- 🏠 The central bank has promised to adjust and optimize property policies to address the deepening crisis in the property market.
- 📱 Analysts believe that the central bank may also implement reserve requirement ratio (RRR) cuts and balance sheet expansion to manage risks in key sectors.
Source: [Reuters](https://www.reuters.com/business/chinas-loan-benchmarks-face-big-cut-next-month-fixing-poll-2022-10-28/)
### Summary
The People's Bank of China is expected to cut interest rates, but may need to take a larger action to calm the uncertainty in the market. Other factors like the US Federal Reserve's Jackson Hole Symposium and the BRICS summit will also impact investor sentiment.
### Facts
- 💰 The People's Bank of China is expected to cut interest rates to soothe market concerns.
- 💼 Bank of Korea and Bank Indonesia are expected to keep interest rates on hold this week.
- 🌍 The US Federal Reserve's Jackson Hole Symposium and the BRICS summit will affect investor thinking.
- 📉 Chinese policymakers' conservative nature may result in more aggressive moves in the interest rate cut.
- 🔒 The currency is already weak and vulnerable, posing a risk to further cuts.
- 📉 Economists are lowering Chinese GDP growth forecasts, doubting the country will achieve its 2023 goal.
- 🏘️ The real estate crisis and the scale of indebtedness raise questions about the stability of the shadow banking system.
- 🔧 Beijing is taking steps to boost confidence, but measures seem insufficient.
- 📉 Chinese blue chip stocks have decreased by 6% in the last two weeks.
- 🌐 Global markets are facing a deteriorating backdrop, with the dollar surging, US Treasury yields rising, and stock markets experiencing instability.
- 🗓️ Key developments on Monday include China's interest rate decision, Thailand's Q2 GDP, and Hong Kong's July inflation.
### Summary
Foreign banks are lowering their China forecasts as the property sector shows increasing signs of distress with missed payments by major developers.
### Facts
- 💰 Property contagion concerns are rising as foreign banks revise their China forecasts downwards.
- 💵 Developer Country Garden has missed payments on two dollar-denominated bonds.
- 💸 Zhongzhi Group, one of China's largest trust companies, has missed payments on multiple financial products.
China's central bank has cut the main benchmark interest rate in an attempt to address falling apartment prices, weak consumer spending, and broad debt troubles, but the reduction was smaller than expected, signaling the potential ineffectiveness of traditional tools to stimulate the economy.
Foreign banks are lowering their China forecasts due to signs of distress in the property sector, with missed payments by developer Country Garden and trust company Zhongzhi Group contributing to rising concerns.
China's central bank has cut its one-year loan prime rate for the second time in three months as the economy struggles to recover from the pandemic, with challenges including a property crisis, falling exports, and weak consumer spending.
China's decision not to cut its five-year loan prime rate to revive the real estate sector and boost the economy is expected to have a limited impact and further weaken confidence, according to economists.
China's big five state-owned banks are expected to see a decline in revenue and narrower net interest margins as they face challenges such as low credit demand and pressure to support the economy amid a debt crisis in the property sector.
China's economy is at risk of entering a debt-deflation loop, similar to Japan's in the 1990s, but this can be avoided if policymakers keep interest rates below a crucial level to stimulate economic growth.
China has introduced new mortgage policies to boost its property market and stimulate economic growth by allowing more people to be classified as first-time homebuyers and receive lower mortgage rates.
Central bankers are uncertain if they have raised interest rates enough, prompting concerns about the effectiveness of their monetary policies.
Chinese state-owned banks are expected to lower interest rates on existing mortgages, with the quantum of the cut varying for different clients and cities, in an effort to revive the property sector and boost the country's economy.
The Federal Reserve's monetary tightening policy has led to a surge in mortgage rates, potentially damaging both the demand and supply in the housing market, according to Mohamed El-Erian, chief economic advisor at Allianz.
Guangzhou, the first major Chinese city to do so, has announced an easing of mortgage curbs in an effort to revive the property sector and stimulate the economy, a move that is expected to be followed by other top-tier cities.
China is planning to relax home-purchase restrictions and implement new measures to address the debt crisis in its property sector, which accounts for a quarter of its economy, in an effort to boost consumer demand.
Chinese homebuyers remain skeptical about entering the property market despite the Beijing government's measures to revive the economy, including lower mortgage rates, due to concerns about the slowing economy and the deepening crisis in the debt-ridden property sector.
The authorities in Beijing and Shanghai are implementing measures to ease mortgage lending rules in an effort to stimulate a slowing housing market, including allowing first-home buyers to enjoy preferential mortgage rates regardless of their previous credit records. This move is expected to drive home sales in the short term, but the long-term impact is uncertain due to low consumer confidence in the face of economic uncertainty.
Emerging-market central banks are resisting expectations of interest rate cuts, which is lowering the outlook for developing-nation bonds, as central banks in Asia and Latin America turn hawkish in response to the "higher-for-longer" stance taken by the Federal Reserve, currency pressures, and the threat of inflation.
Five major state banks in China, including ICBC and China Construction Bank, will lower interest rates on existing mortgages for first-home loans as part of support measures to aid homebuyers and stabilize the property sector.
China's measures to support the property sector are lowering monthly mortgage payments for homeowners but also reducing interest earnings on bank deposits, highlighting the challenge of promoting consumer spending in a weak economic climate.
China's economy is facing challenges due to its real estate crisis and high levels of mortgage debt, but the government is hesitant to provide fiscal stimulus or redistribute wealth, instead aiming to rely on lending to avoid a potential recession. Banks have cut interest rates and reserve requirements, but it is unlikely to stimulate borrowing. However, economists predict that policymakers will intensify efforts in the coming months, such as changing the definition of first-time home buyers and implementing property easing measures, to address the economic downturn.
Central banks, including the US Federal Reserve, European Central Bank, and Bank of England, have pledged to maintain higher interest rates for an extended period to combat inflation and achieve global economic stability, despite concerns about the strength of the Chinese economy and geopolitical tensions.
Portugal's government has announced that banks must reduce mortgage interest rates for borrowers struggling with rising interest rates, by discounting the benchmark six-month Euribor rate by 30%.
High mortgage rates are expected to continue stalling homebuyers, as the Federal Reserve maintains its strict monetary policy until inflation reaches its 2% target rate.
Major Chinese banks have reduced rates for outstanding home loans in an attempt to stimulate demand in the country's troubled property sector, but analysts doubt that the cuts will be sufficient to boost demand due to low consumer confidence and income expectations.
The strain from interest rate hikes is starting to impact the real estate market, particularly in Germany and London, as well as the Chinese property sector; corporate debt defaults are increasing globally; banking stress remains a concern, especially regarding smaller banks and their exposure to commercial real estate; and the Bank of Japan's tighter monetary policy could lead to a sharp unwind of investments, potentially impacting global markets.
Canadian banks are facing major issues due to the large share of variable-rate mortgages, resulting in negative amortization and difficulties for borrowers in the rising rate environment.
China's local governments are accumulating more debt by spending billions to recapitalize struggling small banks, as these banks face default risks and poor governance, posing instability to the state-owned financial system and potentially impacting the credit supply for the real economy; however, there are concerns that local governments may not be able to support these smaller banks if they are already heavily indebted or if the banks' performance does not improve.
China's property market blowup, which has led to major developers struggling and low housing sales, may not necessarily result in a financial crisis due to the unique characteristics of China's housing market and Beijing's control over the financial system, but it is expected to cause significant damage to bank balance sheets and potentially lead to widespread financial turbulence if support is not provided to local governments and small lenders.
The housing industry blames the Federal Reserve for unnecessarily high mortgage rates, stating that if the Fed had provided clearer guidance, rates could be significantly lower, which poses risks to economic growth.
Several housing groups, including the Mortgage Bankers Association, are urging the Federal Reserve to reduce rates as mortgage rates climb to 7.5%, fearing that further increases may lead to a recession.
Mortgage rates have reached a new high due to uncertainty over the Federal Reserve's next move and the geopolitical climate, causing market activity to stall and trade groups to ask for more transparency from the Fed.
