Warning: JR is trying to explain the economy to himself. His word pool and previous knowledge about this topic are shaky, and the following may or may not make sense – you’ll have only have yourselves to blame if you base your homework (or investment decisions) on this post.
The China Construction Bank is the leading bank in the mortgage business, writes China Radio International (CNR). The base rate (基准利率)1) for first-home buyers was now at the base rate, while it had still been at 105 to 110 per cent a few months ago, the station’s reporter learns from a China Construction Bank outlet in Beijing. The base rate as an index apparently reflects the costs of a loan, and everything above it reflects the risks a creditor runs, depending on the specific client risk factor. Possibly, what is added to the base rate may also reflect external risks, as the Swedbank Baltic Annual Report 2010 describes on its page 5.
Not only the Construction Bank, but the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China, and the Bank of China (BoC), too, had lowered mortgage rate to the base rate, the CNR reporter is informed. In Guangdong Province, there are even occasional ten-per cent discounts on the base rate. Depending on how good clients are for the money, there could also be discounts here and there in Beijing, according to a real estate agent. Such rates, however, are only available from some private banks, and not from state-owned banks. Decisions were also being made more quickly now – from a waiting time of one or two months down to one or two weeks for the customers.
While all statements in the article so far were made by anonymous interviewees, names can be cited when it comes to explanations for the changes. They reflect home-buyers’ rigid demand (刚性需求)2), explains a Centanet researcher, Zhang Dawei (张大伟). However, these changes were only meant to reach the share of rigid demand within overall demand, and didn’t spell an ease in regulations, as demand was still there after all. (调控从原来的全部卡死，到现在，对于真正的刚需，也要逐步的释放出这部分需求。这个也不是说调控放松，因为这部分人确实有购房需求。) The changes were focused on Beijing, Shanghai, Guangzhou, and Shenzhen, and mattered most in Beijing and Guangdong Province. Experts believed that this reflected no general change of direction in market regulation, according to CNR. For buyers of a second home, the rate was at about 110 per cent, and there was no chance of a break there, according to the Construction Bank empolyee. CNR adds:
Real estate date confirmed the impression that there was no regulation relaxation, writes CNR. January, under the influence of spring festival and regulation, showed a clear decline in transactions in China’s twenty major cities, with less than 50,000 objects being sold, which spelled a downward adjustment of more than 50 per cent.
Also, small flats weren’t easily available, and size and location had little influence on prices, as developers seemed to be reluctant to sell cheaply, even if “cash is king” (现金为王). Why the reluctance? For one, profits are low, and besides, developers expect the situation to improve during the second half of 2012, CNR quotes experts. However, Zhang Dawei is quoted as warning that only more sales can offset the impact of the current base rate changes. Besides, the state council’s3) policies pointed into a direction where first-home buyers should be put into a position to buy at affordable prices.
Reuters quotes Zhu Baoliang, chief economist at the State Information Centre, a top government think-tank, as urging tax cuts and slashes in bank’s reserve requirements to underpin growth in 2012. Overall, Zhu is said to have forecasted three major risks for the Chinese economy, in an interview in December:
a downturn in the once-hot property market, risks from local government debt and underground lending activities.
“The main concern is about the property market,” he said.
1) or benchmark rate
2) Elastic demand would be the opposite.
3) Obviously, Wen Jiabao is mentioned in this context
» Modern Dictionary: DiWang, Nov 22, 2010