China's new round of supportive economic measures: Nomura sees China’s new easing package as insufficient to materially bolster growth

Overview

Nomura assesses China’s latest package of targeted monetary and mortgage-support measures. While the measures can support infrastructure financing and selected lending channels, the report concludes that their limited scale and narrow property eligibility mean they are unlikely to materially strengthen overall growth.

Core views

China’s authorities announced a new easing package involving the PBoC, Ministry of Finance and National Financial Regulatory Administration. Measures include a 25bp cut in the one-year pledged supplementary lending (PSL) rate to 1.50% from 1.75%, expanded PSL eligibility for “six networks” construction, RMB700bn of additional re-lending quotas for selected sectors, and a mortgage-interest subsidy program. Nomura considers the package unsurprising and judges that it is either too small or does not sufficiently address the fundamental constraints on growth. The monetary measures rely on structural monetary policy instruments rather than broad policy-rate or reserve-requirement-ratio cuts. PSL support now extends to water, new-type power grids, compute power, next-generation communications, urban underground pipelines and logistics. The technology-innovation and technological-transformation re-lending quota rises by RMB200bn to RMB1.4trn, while its support ratio increases to 100% from 60%, meaning the PBoC can fund the full principal of qualifying tech loans. Agriculture and small-business re-lending and rediscount quotas rise by RMB500bn to RMB4.85trn, including RMB300bn more for private-enterprise re-lending, taking that component to RMB1.3trn. Nomura sees some improvement in policy transmission and fiscal-monetary coordination, particularly through full funding of qualifying technology loans and the inclusion of infrastructure networks alongside RMB800bn of policy-bank financing instruments. If funds are deployed promptly, credit and fixed-asset-investment growth could rebound moderately in Q4. However, the report emphasizes that re-lending quotas are ceilings rather than committed lending. Under the “lend first, borrow later” design, base money is created only after banks extend qualifying loans and draw on PBoC funds, so both liquidity and credit effects remain dependent on actual loan demand, which is weak. Compared with January’s easing round, the package is narrower in both pricing and scale. In January, the PBoC cut rates on all structural facilities by 25bp, lowering re-lending to 1.25% and PSL to 1.75%; the latest action cuts only PSL. New quotas total RMB700bn, versus RMB900bn in January plus a RMB200bn bond risk-sharing facility. The new PSL rate matches the 1.50% rediscount rate and remains 10bp above the 1.40% seven-day open-market-operation rate. The mortgage-interest subsidy provides a 1% subsidy for up to five years, begins on 1 October and lasts one year. It is the first direct central-government fiscal support for property-sector homebuyers, but eligibility is constrained to first-home purchases, new or existing homes no larger than 120 square metres and priced at no more than RMB1.5mn. Refinancing of existing mortgages does not qualify, and affordable-housing and Provident Fund mortgages are excluded. Nomura therefore concludes that the policy mainly supports first-time purchases of lower-priced homes, largely in smaller cities. The report expects limited housing-market impact because prospective buyers in lower-tier cities still expect further price declines amid sustained population outflows and the legacy of the 2015–18 property bubble. Many purchases in large cities are excluded, leaving their mortgage burden relatively high. Nomura also notes that middle-income households may retain an incentive to prepay mortgages, which would continue to weigh on aggregate loan growth and banks’ balance sheets. New mortgage loans in the first eight months of the year were only about RMB20bn, a record low and far below the RMB4.2trn peak in 2021. Nomura’s estimate of the subsidy’s fiscal and household impact begins with roughly RMB7.4trn of 2026 new-home sales and RMB6.5trn of existing-home sales, or around RMB13trn combined. Assuming half is mortgage financed, excluding Provident Fund mortgages at around 18%, using an 86.9% first-home share, and assuming 40–60% of transactions satisfy the size and price limits, it estimates qualifying commercial mortgages of a limited scale. At a 1% subsidy rate, annual interest savings are estimated at RMB20–30bn—well below the RMB170bn and RMB150bn effects from the existing-mortgage-rate adjustments in late 2023 and late 2024, respectively. More broadly, Nomura argues that limited interest-subsidy programs have not yet produced a meaningful consumption response. Ministry of Finance-supported service-business and consumption-loan programs backed RMB1.88trn of consumption in the first seven months of the year, yet retail-sales growth slowed to 1.2% year on year in January–July from 3.7% in 2025. The report argues that resolving the property downturn requires cleaning up large property-related non-performing debt, while broader economic weakness also calls for structural reforms to public finance and the social-security system.

Analysis framework

Nomura compares the new targeted toolkit with January’s easing round, assesses how structural lending tools transmit into credit creation, and estimates the mortgage subsidy’s likely reach using home-sales values, mortgage-financing assumptions, eligibility rules and subsidy terms. It then relates the calculated household savings to earlier mortgage-rate measures and recent lending and consumption data.

Methodology notes

• Other

  Bottom-up estimate of mortgage-subsidy coverage and annual interest savings

  The report starts with estimated new and existing home transactions, then applies mortgage-financing, Provident Fund, first-home and eligibility assumptions to estimate the program’s annual household interest savings.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Structural monetary-policy transmission

  The report explains that PBoC quota increases affect liquidity and credit only after banks make qualifying loans, making the ultimate effect dependent on private loan demand and use of funds.

Key data

• One-year PSL rate1.50%Cut by 25bp from 1.75%.
• Additional re-lending quotasRMB700bnIncludes RMB200bn for technology innovation and transformation and RMB500bn for agriculture and small businesses.
• Technology re-lending quotaRMB1.4trnRaised by RMB200bn; support ratio increased to 100% from 60%.
• Agriculture and small-business re-lending and rediscount quotaRMB4.85trnRaised by RMB500bn, including private-enterprise re-lending of RMB1.3trn.
• Mortgage subsidy1% for up to five yearsBegins 1 October and operates for one year.
• Estimated annual mortgage-interest savingsRMB20–30bnNomura’s estimate; below RMB170bn and RMB150bn effects from the late-2023 and late-2024 mortgage-rate adjustments.
• New mortgage loans in the first eight monthsAbout RMB20bnA record low, versus a RMB4.2trn peak in 2021.
• Retail-sales growth1.2% year on yearJanuary–July growth, down from 3.7% in 2025.

Impact & implications

The report expects only modest near-term support for credit and fixed-asset investment if infrastructure-related funds are deployed quickly. It does not expect the package to end the property slump or materially lift overall growth, because policy uptake depends on weak credit demand and the mortgage subsidy is narrowly targeted.

Risks

• Weak private credit demand may prevent re-lending quotas from being fully used, limiting liquidity and credit effects.
• Continued expectations of falling home prices and population outflows in lower-tier cities may constrain the mortgage subsidy’s effect on home sales.
• Mortgage prepayments by middle-income households may continue to pressure loan growth and banks’ balance sheets.

What to watch

• Whether policy-bank and PBoC-linked funding for the “six networks” is deployed promptly and supports Q4 credit and fixed-asset-investment growth.
• Actual utilization of the enlarged re-lending quotas and demand for qualifying loans.
• The response of first-time homebuyers in lower-tier cities to the mortgage-interest subsidy.
• Mortgage lending trends, property-price expectations and the pace of retail-sales growth.