China cut its pledged supplementary lending rate by 25 basis points and introduced nationwide interest subsidies for eligible first-time homebuyers starting October 1. The People’s Bank of China and the finance ministry announced the counter-cyclical measures to bolster a slowing economy and ease market strains.
Central Bank Trims Lending Facility Rate
The People’s Bank of China reduced the rate on its pledged supplementary lending (PSL) facility by 25 basis points, lowering the one-year PSL rate from 1.75% down to 1.5%.
Alongside the rate reduction, authorities broadened the scope of the PSL facility itself. The central bank will now direct funds toward investments in water, power-grid, computing, communications, urban pipeline, and logistics networks, expanding its traditional footprint.
Targeted Relending Quotas Expanded for Businesses and Farms
Financial authorities scaled up several relending quotas to inject liquidity into targeted sectors. The quota for the sci-tech innovation and technological upgrading relending facility rose by 200 billion yuan (equivalent to $29.84 billion), reaching a total of 1.4 trillion yuan.
Additional capital injections target smaller enterprises and agricultural operations. Meanwhile, the central bank raised its separate relending quota for private enterprises by 300 billion yuan, bringing that total to 1.3 trillion yuan.
Commercial Mortgage Subsidies for First-Time Homebuyers
A statement released by the finance ministry detailed that qualifying loans will receive an annual interest subsidy of 1 percentage point for up to five years.
The policy places strict parameters on qualifying properties. The subsidized portion is capped at 1 million yuan per household. Eligible homes must possess a floor area of no more than 120 square metres and carry a purchase price of no more than 1.5 million yuan per household.
Economic Backdrop and Policy Coordination
The combined monetary and fiscal measures arrive as Beijing confronts rising economic strains. By pairing central bank liquidity injections with direct mortgage relief, the cabinet and financial regulators are attempting to simultaneously repair the property market and stimulate industrial and technological investment.
The exchange rate referenced in official statements stands at $1 to 6.7030 Chinese yuan renminbi.
