The non-payment would impact the country's banking industry as the non-performing assets will pile up further. In June the average prices of new homes declined by 0.5% year-on-year, following a 0.1% a month earlier, data website Trading Economics revealed. The real estate sector accounts for almost 30% of China's GDP. The LPR is based on the rates offered by domestic and foreign lenders to their best customers in mainland China, but is subject to various channels of influence from the People’s Bank of China. The reduction in the benchmark loan prime rate will cut borrowing costs on new mortgages nationwide and boost the country’s debt-laden real estate sector, which accounts for almost a third of annual economic output.

The five-year loan prime rate was lowered to 4.3% from 4.45% on Monday, equaling a rate cut in May that was the largest on record. No wonder then that the People's Central Bank has slashed its mortgage lending rate for the second time this year in an attempt to limit the fallout from a liquidity crisis in the property sector. This is happening only two months ahead of the Chinese communist party congress when comrade Xi Jinping is expected to confirm a third five-year term, following on the constitutional change of 2018 that scrapped presidential term limits.

In June the average prices of new homes declined by 0.5% year-on-year, following a 0.1% a month earlier, data website Trading Economics revealedĬhina is again facing a challenging real estate situation, with homeowners in different provinces refusing to pay mortgages on their undelivered, unfinished flats.

Trading economics