China's government announced a series of targeted steps aimed at boosting economic growth and stabilizing the struggling property market as it strives to meet its 2026 year-end growth target.
- Central bank reduces pledged supplementary lending rate to 1.5%
- Mortgage interest subsidies introduced for eligible first-time homebuyers
- Relending quota for tech innovation increased by 200 billion yuan
What happened
China’s central bank cut the interest rate for pledged supplementary lending (PSL) by 0.25 percentage points to 1.5%, aiming to lower funding costs for state policy banks that support public projects. Additionally, the relending quota dedicated to technological innovation has been increased by 200 billion yuan, pushing the total to 1.4 trillion yuan.
The Ministry of Finance also rolled out mortgage interest subsidies for first-time homebuyers, providing annualized support equal to 1 percentage point on their mortgage principal for up to five years. These subsidies apply to properties up to 120 square meters and priced no higher than 1.5 million yuan, addressing the needs of homebuyers in lower-tier cities facing significant market headwinds.
Why it matters
China is targeting economic growth between 4.5% and 5% for 2026, a slowdown compared to last year’s 5%. Growth during the second quarter slowed to 4.3%, the weakest expansion in over three years, reflecting mounting pressures from a prolonged downturn in the property market and broader economic uncertainties.
The property sector has experienced a sharp slump since 2021, marked by a liquidity crisis and falling home prices exceeding 20% in many areas. The new measures signal a strategic and selective approach by policymakers to stimulate demand where it is most needed, particularly in less affluent cities, while supporting key innovation projects through cheaper financing.
What to watch next
Monitoring the uptake of the mortgage subsidies and their impact on housing demand in lower-tier cities will be crucial. A rebound in homebuyer activity could indicate early success in stabilizing the property sector, which remains a critical pillar of China’s economic outlook.
Attention will also focus on how these measures influence overall economic performance in the final quarter of 2026. The government’s ability to sustain or accelerate growth amid global uncertainties and domestic challenges will shape policy decisions going forward.