China Frees Banks to Lend More in Latest Attempt to Spur Economy

China’s central bank announced a policy change on Thursday that will allow the country’s banks to lend more money, but a nationwide economic slowdown has left many companies and households wary of borrowing, the New York Times reported. The move is the latest in a series of economic stimulus measures by the Chinese government as growth has failed to rebound strongly this year as many expected after nearly three years of stringent pandemic-control regulations. Other measures taken to strengthen borrowing and spending have included government-guided interest rate cuts in June and a round of rate reductions last month on many bank loans. Policymakers in some of China’s biggest cities have taken steps to make it easier to get a mortgage by lowering down payment requirements. The dilemma for the banks is that many companies, facing weak sales, are reluctant to borrow more. And as the country’s housing market sinks, many households have been paying down existing mortgages and taking out fewer new ones to buy new apartments. Banks have found themselves under pressure to lend money by buying bonds from deeply indebted provincial and local governments that need to pay for big infrastructure projects to create jobs. A flurry of government bonds has already been scheduled to be issued in the coming weeks. Beijing has also encouraged the banks to keep lending to some real estate developers. Property firms can no longer borrow on overseas bond markets because more than four dozen of them defaulted on bonds or missed payments, spooking foreign investors. Read more.