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China Eases Lending Standards to Boost Housing - Will it Work?

China Eases Lending Standards to Boost Housing - Will it Work?

Renee Mu, Currency Analyst


This daily digest focuses on market sentiment, new developments in China’s foreign exchange policy, changes in financial market regulations and Chinese-language economic coverage in order to keep DailyFX readers up-to-date on news typically covered only in Chinese-language sources.

- China’s central bank cut the minimum down payment ratios for mortgages to stimulate the housing sector.

- The iron and steel industry in China reported negative profit in 2015 due to over-production.

- Luxembourg has become the largest non-Asian yuan offshore center for yuan-denominated bonds.

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Sina News: China’s most important online media source, similar to CNN in the US. They also own a Chinese version of Twitter, called Weibo, with around 200 million active usersmonthly.

- China’s central bank announced that the required mortgage down payment in the cities without purchase restrictions will be reduced to 20 percent from 25 percent for the first-home buyers. The new policy aims to support the property market and reduce the stockpile of unsold homes. Last December, the Chinese government has released five key tasks to be done in 2016. One of them is to reduce the rising home inventory. The minimum down payment for the second-home purchases is also reduced, cut to 30 percent from 40 percent. Besides helps to the property market, the new policy will also encourage borrowings from banks, which are now having shrinking business in the slowing economy.

- For Chinese iron and steel industry, winter is not over yet. According to a report released by China Iron & Steel Association, the industry’s CSPI Index in December fell by 32.16% from a month earlier. The total profit of the industry in 2015 dropped to a negative reading of 64.53 billion yuan. Over 50% of member companies reported losses in 2015. One of the top five tasks in 2016 for China is to deal with the overcapacity issue. The iron and steel industry report shows that the country still has a long way to go.

- Overall tone on the stock market from Sina News: Mixed.

SAFE: China’s foreign exchange regulator.

- The foreign exchange regulator released data of QFII and RQFII programs in January. These figures can be used as indicators for Chinese capital flows controls. QFII is short for Qualified Foreign Institutional Investors, who are allowed to purchase securities in mainland China with non-yuan currencies. RQFII is RMB Qualified Foreign Institutional Investors who are allowed to purchase securities with the yuan. The QFII quota issued in January was $80.795 billion, falling by $275 million from the previous month. The January RQFII quota was 469.825 billion yuan, increasing by 25.5 billion yuan.

China Stock News:Chinese leading online media of financial news

Luxembourg has become the largest non-Asian offshore center for yuan-denominated bonds, which are also called as dim sum bonds. As of the end of October, yuan-denominated bonds issued at Luxembourg have taken up 43% of total yuan bonds issued in non-Asian regions. London and Dublin ranked the second and the third respectively, accounting for 27% and 9%. In order to improve yuan’s international role, China has been proactively promoting yuan’s offshore centers outside Asia.

- Overall tone on the stock market from China Stock News: Mixed.

Written by Renee Mu, DailyFX Research Team

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.