China’s new round of supportive measures and their macroeconomic impact: Nomura sees China’s new targeted easing package as insufficient to materially lift growth

Overview

Nomura reviews China’s latest package of targeted monetary and housing support and concludes that it is unlikely to materially improve growth. The institution sees limited transmission from expanded lending facilities and only a modest effect from the narrowly targeted mortgage-interest subsidy.

Core views

China’s economic and financial authorities introduced a package intended to lower financing costs and expand central-bank-supported lending. Measures include a 25bp cut in the one-year pledged supplementary lending (PSL) rate to 1.50% from 1.75%; broader PSL eligibility for “six networks” construction—water, new-type power grids, compute power, next-generation communications, urban underground pipelines and logistics; a RMB200bn increase in technology-innovation and technological-transformation re-lending to RMB1.4trn; and a RMB500bn increase in agriculture and small-business re-lending and rediscount quotas to RMB4.85trn. Of the latter, private-enterprise re-lending rises by RMB300bn to RMB1.3trn. Nomura considers the package unsurprising and believes its overall growth impact will be limited because the measures are either small in scale or do not address the fundamental barriers to growth. The report emphasizes that structural monetary-policy quotas do not automatically become credit creation. Under the “lend first, borrow later” mechanism, banks must first extend qualifying loans and then draw on the PBoC quota, so both base-money creation and credit growth depend on borrowers’ actual demand. The change to a 100% support ratio for qualifying technology loans is viewed as a potentially meaningful marginal improvement because the PBoC can now fund the full principal. The sector mix also shifts toward infrastructure through the six-networks program and sits alongside RMB800bn of policy-based financing instruments deployed by policy banks. Nomura says that prompt spending could allow credit and fixed-asset-investment growth to rebound moderately in Q4, but this remains conditional on implementation and loan demand. Compared with the January easing round, the latest measures are more narrowly targeted in both pricing and scale. In January, the PBoC cut rates on all structural facilities by 25bp, taking re-lending to 1.25% and PSL to 1.75%; this time, only the PSL rate was reduced. The new PSL rate matches the 1.50% rediscount rate and remains 10bp above the 1.40% seven-day OMO rate. New quotas total RMB700bn, versus RMB900bn in January, when a separate RMB200bn bond risk-sharing facility was also introduced. This comparison underpins Nomura’s view that the current package does not represent a broad monetary easing response. The new mortgage-interest subsidy provides a 1% subsidy for up to five years, starts on 1 October and lasts one year. It applies only to first-home purchases, new or existing, with a maximum size of 120 square metres and total price of RMB1.5mn; refinancing of existing mortgages is excluded, as are affordable-housing and Provident Fund loans. Nomura views this as the first direct central-government fiscal funding for the property sector focused on homebuyers, but concludes that the eligibility restrictions concentrate support on lower-priced first-home purchases, largely in smaller cities. In those markets, households may still expect further price declines because of sustained population outflows and the aftermath of the 2015-18 property bubble. Purchases in large cities will often be excluded, leaving mortgage burdens relatively high and preserving incentives for some middle-income households to repay mortgages early. Nomura estimates the program’s annual interest-payment saving at only RMB20-30bn. Its calculation assumes 2026 new-home sales of about RMB7.4trn, down from RMB8.4trn in 2025; after excluding affordable housing, about RMB6.3trn of new-home value remains. Existing-home transaction value is estimated at around RMB6.5trn, for total new and existing transactions of roughly RMB13trn. Assuming half is mortgage-financed and excluding Provident Fund mortgages of around 18%, commercial mortgage loans are estimated at roughly RMB5.3trn. The report assumes a first-home share comparable to the Provident Fund’s 86.9% in 2024 and that 40-60% of transactions meet the size and price limits. The resulting subsidy effect is far below the estimated RMB170bn impact of the late-2023 existing-mortgage rate adjustment and RMB150bn impact of the late-2024 adjustment. Weak mortgage demand reinforces Nomura’s cautious conclusion: new mortgage loans in the first eight months of the year fell to about RMB20bn, a record low and far below the RMB4.2trn peak in 2021. The report also cites limited results from prior subsidy programs: services-business and consumption-loan support totaled RMB1.88trn 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. Nomura argues that a durable end to the property downturn would require cleaning up the sector’s large stock of non-performing debt, while broader economic weakness also calls for structural reform of public finance and the social-security system.

Analysis framework

Nomura compares the scale and design of the new structural monetary measures with January’s easing round, then assesses transmission through banks, borrower demand and infrastructure spending. It separately estimates the mortgage subsidy’s eligible loan base using home-sales, mortgage-financing, Provident Fund, first-home and eligibility assumptions, and compares the projected savings with earlier mortgage-rate adjustments.

Methodology notes

• Other

  Scenario-based estimate of mortgage-subsidy fiscal cost and household interest savings

  The report builds an estimate from assumed new and existing home transactions, mortgage-financing shares, Provident Fund exclusions, first-home shares and eligibility limits to calculate the likely annual savings from the 1% subsidy.

• MacroeconomicsCredit and Debt Cycle

  Credit-demand and monetary-policy transmission analysis

  The report explains that re-lending quotas create liquidity only when banks make qualifying loans and borrowers demand credit, making weak private credit demand central to the expected limited effect.

Key data

• 1-year PSL rate1.50%Cut by 25bp from 1.75%.
• New re-lending quotasRMB700bnCompared with RMB900bn in January; January also included a RMB200bn bond risk-sharing facility.
• 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 RMB300bn for private-enterprise re-lending to RMB1.3trn.
• Mortgage subsidy1% for up to five yearsBegins 1 October and lasts one year.
• Estimated annual mortgage-interest savingsRMB20-30bnNomura’s estimate; compared with RMB170bn from the late-2023 adjustment and RMB150bn from the late-2024 adjustment.
• New mortgage loansAbout RMB20bnFirst eight months of the year; a record low versus RMB4.2trn at the 2021 peak.
• Retail sales growth1.2% year-on-yearJanuary-July, down from 3.7% in 2025 despite prior consumption-support programs.

Impact & implications

Nomura expects only limited near-term macro support because the policy tools remain targeted and their effectiveness depends on loan demand and rapid use of funds. It believes the mortgage subsidy is unlikely to materially revive housing activity or resolve pressures on loan growth and bank balance sheets, while deeper property-debt cleanup and structural fiscal and social-security reforms remain necessary.

Risks

• Weak private credit demand could prevent structural lending quotas from being fully used.
• Households in lower-tier cities may defer purchases if they continue to expect home prices to fall.
• Exclusion of many large-city buyers may limit the mortgage subsidy’s effect on housing demand.
• Early mortgage repayment could continue to weigh on aggregate loan growth and bank balance sheets.

What to watch

• Whether banks draw on the expanded structural-policy quotas and extend qualifying loans.
• Whether six-networks funding is deployed promptly enough to support Q4 credit and fixed-asset-investment growth.
• Actual take-up of the mortgage subsidy and its effect on home sales.
• Trends in mortgage lending, home-price expectations and property-sector non-performing debt.