In a note, analysts at Bank Credit Analyst suggest that the monetary easing measures introduced by the People's Bank of China (PBoC) may offer a short-term lift to market sentiment. However, drawing parallels to Japan's housing crisis of the 1990s, they warn that monetary easing alone is unlikely to halt a deflationary spiral or drive a lasting recovery in consumer spending. The report stresses that without a recovery in the labor market or significant fiscal measures aimed at boosting household disposable income, any improvement in sentiment is expected to be fleeting.
The analysis highlights that the 50 basis point cut to existing mortgage rates could potentially save homeowners approximately 150 billion renminbi annually in interest payments, providing some relief by reducing financial burdens and easing cash flow. Yet, on a larger scale, these savings are not expected to significantly increase household consumption or deliver a substantial boost to the broader economy.
