China’s new round of supportive measures: Nomura sees China’s new targeted easing package as insufficient to materially support growth

Overview

Nomura assesses China’s latest monetary and fiscal-support package and concludes that it is a limited, targeted response rather than sufficient stimulus to reverse weak growth or the property downturn. Infrastructure-related financing may gain some near-term support, while the mortgage subsidy is expected to have only a marginal effect on housing demand.

Core views

China’s top economic and financial authorities introduced a package intended to lower financing costs and increase central-bank lending, including a 25bp cut in the one-year pledged supplementary lending (PSL) rate to 1.50% from 1.75%, expanded PSL eligibility, and RMB700bn of additional re-lending quotas. Nomura considers the announcement broadly anticipated and judges its overall economic effect likely to be limited: the measures are either small in scale or do not directly resolve the barriers restraining real growth. The monetary measures comprise four changes. PSL eligibility now includes “six networks” construction—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 technology loans. Agriculture and small-business re-lending and rediscount quotas rise by RMB500bn to RMB4.85trn, including a RMB300bn increase in private-enterprise re-lending to RMB1.3trn. Nomura views the full funding ratio and broader infrastructure mix as the more meaningful marginal changes, alongside closer fiscal-monetary coordination and RMB800bn of policy-based financing instruments deployed by policy banks. However, Nomura stresses that these structural-facility quotas are ceilings rather than commitments. Under the “lend first, borrow later” design, base money is created only after banks make qualifying loans and draw on PBoC funding; therefore, actual liquidity and credit effects depend on loan demand. Compared with January’s package, this round is narrower in both pricing and size: January cut rates on all structural facilities by 25bp, while this round cuts only PSL. New quotas total RMB700bn, versus RMB900bn in January plus a RMB200bn bond risk-sharing facility. If the policy-financing funds are spent promptly, the report sees scope for a moderate rebound in credit and fixed-asset-investment growth in Q4, particularly through the six-networks programme. The report also examines the newly announced mortgage-interest subsidy, jointly introduced by the Ministry of Finance, PBoC and National Financial Regulatory Administration. It provides a 1% interest subsidy for up to five years, begins on 1 October and lasts one year. It applies only to first-home purchases, whether new or existing, with a maximum home size of 120 square metres and total price of RMB1.5mn; mortgage refinancing, affordable-housing mortgages and Provident Fund loans are excluded. Nomura notes that this is the first direct central-government fiscal funding for the property sector focused on homebuyers, but believes the restrictions concentrate support on lower-priced first homes, mainly in smaller cities. Nomura expects little improvement in home sales because buyers in lower-tier cities still generally expect further price declines amid the after-effects of the 2015-18 property bubble and sustained population outflows. Many purchases in major cities are excluded, leaving mortgage burdens relatively high. The report adds that some middle-income households may still prefer early mortgage repayment given prevailing investment returns, continuing pressure on loan growth and bank balance sheets. New mortgage loans in the first eight months were only about RMB20bn, a record low and far below the RMB4.2trn peak in 2021. To estimate the subsidy’s size, Nomura assumes 2026 new-home sales of roughly RMB7.4trn, down from RMB8.4trn in 2025; after excluding affordable housing, this becomes about RMB6.3trn. It estimates existing-home transaction value at around RMB6.5trn, implying total new and existing transactions of about RMB13trn. Assuming half is mortgage-financed, excluding Provident Fund loans of about 18%, applying an 86.9% first-home share and assuming 40-60% meet the size and price limits, it estimates eligible commercial mortgages at a level that produces only RMB20-30bn of annual interest savings from the 1% subsidy. This is notably smaller than the estimated RMB170bn effect of the late-2023 existing-mortgage rate adjustment and RMB150bn from the late-2024 adjustment. The report uses weak results from earlier interest-subsidy programmes as supporting evidence. Although services-business and consumption-loan subsidy programmes supported RMB1.88trn of consumption in the first seven months of the year, retail-sales growth slowed to 1.2% year on year in January-July from 3.7% in 2025. Nomura concludes that a lasting resolution of the property bust requires cleaning up substantial property-related non-performing debt, while addressing broader economic weakness also requires structural reforms to public finance and the social-security system.

Analysis framework

Nomura compares the new package with January’s easing measures, traces how structural central-bank facilities create credit only when banks lend, and evaluates the mortgage subsidy through eligibility rules and a transaction-value-based estimate of eligible mortgage lending. It then benchmarks the estimated savings against prior mortgage-rate adjustments and earlier subsidy programmes.

Methodology notes

• Other

  Assumption-based mortgage-subsidy impact estimation

  The report estimates annual interest savings by applying assumptions on home transactions, mortgage financing, Provident Fund exclusion, first-home share and eligibility thresholds to a 1% subsidy.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Monetary-policy transmission through re-lending and policy-bank financing

  Nomura explains that quota expansion affects liquidity, credit and investment only after qualifying loans are made and financing funds are actually deployed.

Key data

• One-year PSL rate1.50%Cut by 25bp from 1.75%.
• Additional re-lending quotasRMB700bnCompared with RMB900bn in January, plus a RMB200bn bond risk-sharing facility then.
• Technology re-lending quotaRMB1.4trnRaised by RMB200bn; support ratio lifted to 100% from 60%.
• Agriculture and small-business re-lending and rediscount quotaRMB4.85trnRaised by RMB500bn, including RMB1.3trn for private-enterprise re-lending after a RMB300bn increase.
• Mortgage subsidy1% for up to five yearsStarts 1 October and lasts one year, subject to first-home, size, price and loan-type restrictions.
• Estimated annual mortgage-interest savingsRMB20-30bnNomura’s estimate; below RMB170bn from the late-2023 mortgage-rate adjustment and RMB150bn from late 2024.
• New mortgage loans in the first eight monthsAbout RMB20bnA record low, versus RMB4.2trn at the 2021 peak.
• Retail-sales growth1.2% year on yearJanuary-July growth, down from 3.7% in 2025 despite prior subsidy programmes.

Impact & implications

Nomura expects the package to provide only limited broad-growth support. Infrastructure financing could lift credit and fixed-asset investment moderately in Q4 if funds are deployed quickly, but weak borrower demand, restricted mortgage eligibility, declining home-price expectations and unresolved property debt constrain the broader transmission of policy easing.

Risks

• Qualifying re-lending quotas may not be fully used because lending, liquidity creation and credit expansion depend on actual loan demand.
• Persistent expectations of home-price declines and population outflows in lower-tier cities may limit the mortgage subsidy’s effect on housing sales.
• Continued early mortgage repayments by some middle-income households could weigh on overall loan growth and banks’ balance sheets.

What to watch

• Whether policy-bank financing and six-networks funds are deployed promptly enough to support Q4 credit and fixed-asset-investment growth.
• Actual take-up of the mortgage subsidy within its first-home, 120-square-metre, RMB1.5mn and commercial-loan restrictions.
• Progress in resolving property-sector non-performing debt and implementing public-finance and social-security reforms.