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BEIJING/HONG KONG, Sept 1 (Reuters) – China stepped up measures to boost the country’s faltering economy on Friday, with top banks paving the way for further cuts in lending rates and sources saying Beijing plans further action including relaxing home-purchase restrictions.
As part of those measures, the authorities also cut the amount of funds institutions need to hold in foreign exchange reserves. The measures cheered investors, and analysts said they should prevent a further downturn in the ailing property sector.
China is grappling with a slowdown that has rattled global markets, with the spotlight now firmly focused on troubled developer Country Garden’s (2007.HK) spiralling debt crisis in a sector that contributes to roughly a quarter of the economy.
As pressure mounts, the authorities have rolled out a series of measures to spur the economy and revive the property market, with steps including the easing of some borrowing rules and a cut to the amount of forex banks must hold as reserves.
The country is set to take further action including relaxing home-purchase restrictions, four people familiar with the matter said.
Regulators including the housing ministry, central bank and financial regulator in coming weeks will implement measures they have been working on over the past few months under State Council guidance, two of the people said.
ANZ’s senior China economist Betty Wang said several nation-wide property easing measures in the past couple of weeks have exceeded market expectations.
“This is the first time since 2021 that China has announced a series of nationwide property easing measures. They will help restore market confidence and prevent the sector from declining further.”
In the near term, however, market sentiment will be swayed by the outcome of a crucial test of investor confidence in Country Garden.
On Thursday, Country Garden delayed a deadline for creditors to vote on whether to postpone payments for an onshore 3.9 billion yuan ($537 million) private bond until Friday 1400GMT to give bondholders “sufficient time” to prepare for the vote.
Ahead of the voting result on Friday, some onshore creditors of that private Country Garden bond received interest payments, sources with direct knowledge of the matter said. They declined to be named as they were not authorised to speak to the media.
Country Garden declined to comment.
Friday’s vote is a key hurdle Country Garden faces as it strives to avoid default, with one holder of the developer’s dollar bonds saying if the company cannot extend its domestic debt, it will be unable to service external bondholders.
“This has been a slow-moving car crash,” said the bondholder, who declined to be identified due to the sensitivity of the issue, adding that concerns centred around uncertainty over the broader economy and tensions with Washington.
“Everything they do right now is going to have an impact five to 10 years down the line.”
Country Garden, China’s largest private developer by sales, did not immediately respond to Reuters request for comment.
Stress in the property market has intensified pressure on Beijing to implement supporting measures and fanned concern about the ability of policymakers to arrest a decline in China’s broader economic growth.
China’s new home prices fell for the fourth month in August, according to a private survey on Friday, as the property debt crisis kept confidence at a low ebb despite the string of support measures.
The central bank said on Friday it would cut the foreign exchange reserve requirement ratio (RRR) by 200 basis points (bps) to 4% from 6% beginning Sept. 15, a move seen aimed at slowing the pace of yuan declines.
The lenders lowering mortgage rates on Friday included Industrial and Commercial Bank of China (601398.SS), China Construction Bank Corp (601939.SS) and Agricultural Bank of China (601288.SS), which cut their deposit rates by between five and 25 basis points, websites from each bank showed. Several midsized banks also announced they will start cutting interest rates on a range of deposits by 10-25 basis points.
The measures helped lift confidence in the market and battered property stocks rallied, with China’s CSI 300 Real Estate Index (.CSI000952) ending up 2.4%, while the blue-chip CSI300 Index (.CSI300) climbed 0.5%.
Three sources familiar with the matter told Reuters on Tuesday that major state banks would cut deposit rates as they prepare to lower interest rates on existing mortgages soon.
Starting from Sept. 25, first-time home buyers with mortgages can apply to their banks for a lower interest rate on their existing loans, China’s central bank and financial regulator announced on Thursday.
The deposit rate cuts are the third such cuts within a year, with the scale of cuts bigger than previous rounds in June and in September last year.
Lower deposit rates will partially offset various pressures on banks’ narrowing net interest margins – a key gauge of profitability, said Nicholas Zhu, a banking analyst at Moody’s.
“The impact of the deposit rate cut is material, given that close to three-quarters of Chinese banks’ liabilities are deposits,” Zhu said.
China’s mortgage loans totalled 38.6 trillion yuan ($5.29 trillion) at the end of June, representing 17% of banks’ total loan books.
Meanwhile, Beijing and Shanghai on Friday announced that they would allow home buyers to enjoy preferential loans for first-home purchases regardless of their previous credit records.
With this, all of China’s first-tier cities have broadened the definition of first-home mortgages, in a bid to boost buyer sentiment.
($1 = 7.2633 Chinese yuan renminbi)
Reporting by Ziyi Tang, Ryan Woo and Wang Jing, additional reporting by Davide Barbuscia in New York; Writing by Sumeet Chatterjee; Editing by Anne Marie Roantree, Lincoln Feast and Susan Fenton
Our Standards: The Thomson Reuters Trust Principles.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
The Canadian Press. All rights reserved.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.
Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.
The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.
Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”
Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.
Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
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