According to news from the “Wall Street Journal” on November 24, the State Council announced that it will moderately cut the RRR to ensure liquidity. At the end of the year, the Chinese New Year is approaching, and the market’s demand for liquidity is at its peak. However, the nationwide lockdown policy has hurt economic expectations.
Economists expect significant depreciation pressure on the yuan against the dollar to remain, making it difficult for the Beijing government to undertake significant policy easing. The new approach means that the Beijing authorities are facing unprecedented economic pressure and have to take risks.
After the release of the RRR cut news, the central bank released a number of policies to stimulate real estate. The authorities also said they would safeguard e-commerce, the platform economy and express delivery networks. The industry believes that this measure will focus on supporting real estate and entity financing.
Donghai Futures Research mentioned that investors should not be too optimistic about the later effects of this policy. The reason is that this policy has little effect on inter-bank liquidity, which makes the funding side not loose enough, and it is even difficult to return to the situation of the past few months.
As of now, the outlook for the real estate sector remains grim. Hang Seng Bank China Chief Economist Wang Dan told the BBC that so far, about 60 of China’s top 100 real estate developers have defaulted, and the remaining 40 companies are about to face default.
Among them, Evergrande’s problems are still difficult to solve. The Financial Associated Press stated on the 23rd that because Evergrande Group was insolvent, more than 12,000 mu of land had been taken back by the government since September last year.