In a note, analysts at Credit Analyst noted that the People’s Bank of China’s monetary easing measures could provide a short-term boost to market sentiment. However, drawing comparisons to Japan’s housing crisis in the 1990s, they cautioned that monetary easing alone is unlikely to halt the deflationary spiral or spark a lasting rebound in consumer spending. The report stresses that without a recovery in the labor market or significant fiscal measures to boost household disposable income, any improvement in sentiment is likely to be fleeting.
The analysis suggests that cutting current mortgage rates by 50 basis points would save homeowners about RMB150 billion a year in interest payments, providing some relief by reducing financial burdens and easing cash flow. But more broadly, these savings are not expected to significantly increase household consumption or provide a significant boost to the broader economy.