News roundup on China: Overseas travel recovery, interest rate cuts, and its economy’s future

For PropertyGuru’s real estate news roundup, we focus on China. China’s recovery in overseas travel is lagging behind market expectations. The central bank cuts two benchmark interest rates in a bid to boost lending and kickstart growth. The third plenum of the CCP Central Committee hinted at a potentially diminished role of the market in driving the country’s economy.

Chinese outbound travel recovery lags due to costs, visa snags

A recovery in Chinese overseas travel from the COVID-19 pandemic is fading as rising costs and difficulties in securing visas cement a preference for local and short-haul destinations.

The delay in a revival to pre-COVID levels by China’s outbound travellers, the world’s top spenders on international tourism and airlines, is hitting travel-related companies, hotels, and retailers globally, according to Reuters.

Eighteen months after China dropped strict zero-COVID policies and reopened its borders, the recovery in overseas travel is lagging behind market expectations and the shape of Chinese travel is changing, with a surge in domestic trips. Pressured by a prolonged property crisis, high unemployment and a gloomy outlook in the world’s second-biggest economy, Chinese consumers have become more frugal since the pandemic, prompting discount wars on everything from travel to cars, coffee, and clothes.

China’s central bank cuts key interest rates to boost lending, kickstart economic growth

China’s central bank on Monday cut two benchmark interest rates in a bid to boost lending and kickstart growth in the world’s second-largest economy.

Beijing is battling an unprecedented crisis in the country’s vast real estate sector, continued weak consumption and a high youth unemployment rate. At the same time, geopolitical tensions with Washington and the European Union threaten its foreign trade.

HKFP reports that a year and a half after the lifting of health restrictions that stunted economic activity, the much-hoped-for post-COVID recovery was brief and less robust than expected. Monday’s rate cuts, anticipated by some economists, are supposed to encourage commercial banks to grant more credit at more advantageous rates.

The one-year loan prime rate, which constitutes the benchmark for the most advantageous rates that banks can offer to businesses and households, was cut from 3.45 percent to 3.35 percent, last lowered in August. The five-year rate, the benchmark for mortgage loans, was reduced from 3.95 percent to 3.85 percent, following a trim in February. The two rates are at historic lows and the cuts come days after a key meeting of the Communist Party in Beijing.

Analysis: ‘Decisive role’ to ‘better leverage’ – China’s third plenum outcomes suggest diminished role of market

China has hinted at a potentially diminished role of the market in driving its economy, analysts say, as they point to clues being offered in the reported outcomes of an economic reform-centred meeting held this week by the upper echelons of China’s Communist Party (CCP).

Known as the third plenum, the four-day closed-door gathering of the CCP Central Committee wrapped up on Thursday (18th July) with a communique that was expectedly long on commitments, running the gamut of topics, but short on specifics.

A press conference the next day (19th July) yielded little insights as party officials doubled down on the pledges. The third plenum had been closely watched for hints on China’s policy direction amid a troubled domestic and external landscape.

Still, there were takeaways. CNA spoke to analysts who highlighted the shift in the language used in the 5,000-word communique, specifically to the role of the market. The document states that it is necessary to “better leverage” the role of the market, foster a fairer and more dynamic market environment, and make resource allocation as efficient and productive as possible.

The Property Report editors wrote this article. For more information, email: [email protected].