Categorized | International

China Finally Easing Banking Restrictions

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After months of standing behind their residential real estate and banking restrictions, China’s government is finally reconsidering their stance. In an announcement made on Saturday, the People’s Bank of China stated that they would be lowering the ratio of reserves that must be placed aside as deposits at the bank.

Many economists believe that fears regarding a housing market collapse in China prompted the easing of restrictions. Real estate investments dropped at least five percent in the last month, showing signs that property developers were holding off on purchasing land in the country. In fact, the number of new land purchases is down fourteen percent from last year.

During the first quarter, it looked as if the market was performing quite well with the restrictions set in place by the government. Many had first predicted that the market would fall roughly twenty percent by the end of the year. The first quarter performance had those same economists questioning their original analysis.

However, after a tumultuous month of May, it looks as if the original predictions were not far from reality. Most believe that the first quarter results were temporary, and not exactly reflective of the true state of the market.

The lending and housing restrictions have made it increasingly difficult for developers to expand their operations. Instead, many of them have cut back construction and stopped buying land. The decline in the number of land purchases is expected to cause a drop in the total pre-sales. As such, the residential real estate market will continue to experience a decline similar to that seen during the month of May should the government fail to further ease its restrictions.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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