The Bank of Korea: "China's Economy, Downside Risks Slightly Eased by Government Stimulus Measures"

Korea Economic Focus by BOK
Economic Slowdown Eases Centered on Consumption and Manufacturing
Housing Transaction Volume Still Below Past Levels

The Bank of Korea assessed that the Chinese economy's downturn has somewhat eased due to the government's stimulus measures.

On the 22nd, the Bank of Korea stated this in its Overseas Economic Focus report titled "Evaluation of China's Real Estate Market Situation and Government Stimulus Measures."

The Chinese government, in response to the slowdown in economic recovery since the second quarter, has promoted measures to stimulate the real estate market and additionally eased monetary and fiscal policies. Recently, alongside real estate market stimulus measures such as lowering prepayment ratios and mortgage interest rates, relaxing housing purchase restrictions, and announcing redevelopment plans for slums in major cities, efforts have been made to expand private demand through cuts in benchmark interest rates and reserve requirement ratios, support for electric vehicle and home appliance purchases, and personal income tax deductions.

The Bank of Korea stated, "Since the introduction of stimulus measures, the economic downturn has eased mainly in consumption and manufacturing," and evaluated that "in the third quarter, the Chinese economy showed growth exceeding market expectations, centered on consumption."

During the National Day holiday period, travel and dining service sales showed a favorable recovery trend, and recently retail sales, mainly of goods consumption, have also improved. The manufacturing Purchasing Managers' Index (PMI) exceeded the baseline (50) for the first time in six months (August 49.7 → September 50.2), indicating a mitigation of the downturn.

Source=Bank of Korea

However, according to the Bank of Korea, the Chinese real estate market has yet to show signs of recovery. The Bank emphasized, "In the real estate market, housing prices, new construction starts, and investment all continue to decline." In particular, although recovery was expected after the National Day holiday period when major stimulus measures were actually implemented, new home sales in October still remain below past levels, and signs of recovery have not materialized.

The Bank of Korea explained that this prolonged real estate market downturn is spreading to financial market instability. It stated, "Since the second half of this year, liquidity risks of real estate developers such as 'Biguoyuan' and 'Yuanyang' have further emerged, and redemptions of trust products by Zhongrong Trust, which has high exposure to the real estate sector, have also been delayed, indicating that the impact of the real estate market downturn is spreading to the financial market." It added, "As a result, stock prices have fallen, foreign investor capital outflows have occurred, and the yuan exchange rate has continued to weaken, showing instability in the financial market."

The Bank of Korea explained, "Major experts evaluate that while the Chinese government is mitigating the risk of a hard landing in the real estate market, it is fundamentally continuing gradual deleveraging, making it difficult for the real estate market to recover in the short term," and added, "It is necessary to closely examine the direction of China's real estate market and the ripple effects of policy responses."

This content was produced with the assistance of AI translation services.