USD188 Bn To Absorb Real Estate Shock

Eric Prouzet/Unsplash

Like India, China is a nation of savers, and the country stashes its money in properties. 

A meteoric rise in homeownership over the past 20 years has diverted an enormous share of China’s household wealth—70%—into real estate. 

Naturally, when Chinese real estate giants (for example, Evergrande is under $300 billion of debt and unable to service it) fail as badly as they recently have, it threatens the country's economic stability. 

Houses Are For Living Only

Per CNN, Beijing had been pretty firm in cracking down on what it saw as excessive borrowing and unruly activity in the property sector. 

Xi in 2017 famously announced that "housing is for living and not for speculation" — a statement that has appears to have driven policy in China for years. 

While industry watchers have long dreaded that Evergrande's collapse could have ripple effects across the property sector in China, which accounts for as much as 30% of GDP, Beijing does not believe in a bailout package, probably to weed out speculation in real estate. 

Economic Stability Package

The People's Bank of China is slashing the reserve requirement ratio for Chinese banks by half a percentage point, starting December 15. 

This move, which lessens the amount of money that banks are required to hold in reserve, will make available 1.2 trillion yuan (USD188 billion) for business and household loans.