China’s stock market was plunging and its currency was teetering. The head of the central bank, fielding questions at a rare news conference, said China would make it easier to get home mortgages.
Today, as China faces another period of deep economic uncertainty, policymakers are drawing on elements of its crisis playbook, but with little sign of the same results. It has become considerably harder for China to borrow and invest its way back to economic strength. At the same time, companies are wary of borrowing money for expansion as their sales tumble and the economy faces deflation. Local governments across much of China are deeply indebted and struggling even to pay their civil servants. Years of heavy infrastructure investments, followed by huge amounts of spending for mass testing and quarantines during the pandemic, have left China less willing to employ fiscal firepower to jolt demand.
The construction and sale of new homes has stalled. More than 50 real estate developers have run out of money and defaulted or stopped payment on bonds.During the pandemic, some countries issued coupons for free or discounted restaurant meals and other services to stimulate spending. But while a few Chinese city governments experimented with such steps, the scale was tiny — offering individuals a handful of coupons worth a few dollars apiece.
When Zhou, the former central bank chief, unleashed a surge of borrowing in 2016, he triggered a frenzy of apartment construction even in remote cities like Qiqihar, a fading, frozen centre of artillery manufacturing near the Siberian frontier. As easy credit sent apartment prices skyward, people in Qiqihar and throughout the country felt richer and flocked to car dealerships and other businesses to spend more money.
Demand for new apartments has now plummeted, leaving little expectation that a repeat of Zhou’s measures in 2016 would quickly revive the market. The annual number of births and marriages has almost halved since 2016, eroding much of the need for people to buy new apartments.