China Cuts Relending Rate and Launches Government Subsidy for Housing Loan Interest

China announced a new package of measures to support the struggling real estate sector, amid growing pressure to achieve the government's growth target before the end of the year. The People's Bank of China lowered the interest rate on subsidized lending by 25 basis points to reach 1.50 percent, a long-term financing program directed by the central bank to banks to fund specific sectors at discounted rates.

The central bank also increased the relending quota allocated for technological innovation by 200 billion yuan, or about $30 billion, bringing the total to 1.4 trillion yuan, equivalent to $208 billion. The decision aims to direct credit to tech and industrial companies rather than the real estate sector alone, in an effort to distribute stimulus across productive sectors.

The government launched its first interest rate subsidy for new housing loans, but eligibility conditions remain narrow. The subsidy is limited to new commercial first-home loans only, with an area of up to 120 square meters and a price not exceeding 1.5 million yuan, provided that the subsidized portion is capped at a maximum of 1 million yuan, taking effect on October 1, 2026. Analysts say this structure targets low-income households in small and medium-sized cities rather than luxury real estate investors.

Chinese authorities target an economic growth between 4.5 and 5 percent during 2026. Analysts believe this move signals an accommodative monetary policy, a path opposite to what central banks in developed economies are doing as they move to raise interest rates to counter inflation pressures resulting from energy prices. This policy divergence is expected to be reflected in exchange rates and global trade flows in the coming months. Economists say the success of these measures depends on buyer response, not on the size of the stimulus alone, as household confidence in the real estate market remains weak after years of decline.

What do these terms mean?

Subsidized lending interest rate: A special rate granted by the central bank to commercial banks on the condition that they lend money to sectors it specifies, akin to a conditional discount. Basis point: A small unit of measurement for interest rates, equal to one-hundredth of one percent; meaning 25 basis points equals a quarter of a percentage point.