China's New Realty Norms to Hit Base Metals

Source:

"China's sweeping changes in home loan rules and a ban on third house purchase have added to the woes of base metals market."

China's sweeping changes in home loan rules and a ban on third house purchase have added to the woes of base metals market.

In a recent order, China announced new housing regulations, under which the down payment requirement for a family purchasing a second house has been raised from 40% to 50% with the mortgage rate 1.1 times the benchmark interest rate.

Moreover, a much higher down payment and mortgage rate would be required for the third home and beyond.

Again, banks in the country raised the amount of money they hold in reserves for a third time this year in a new effort to dampen inflation pressures in the world's third-largest economy.

The measure comes as the government tries to cool a credit boom without raising interest rates, which might slow China's economic rebound. Economic growth surged to 11.9% in the first quarter of the year and the government is trying to cool a surge in housing and other prices fueled by massive bank lending.

This will certainly hit the demand for base metals in China, which drives the price of most of the metals in the world. China is a big consumer of copper, steel and other base metals. Even, in the recent past, China has emerged as a huge buyer of gold with its GenNext buying the yellow metal and platinum jewelry.

The flood of money coursing through the economy pushed up politically sensitive housing prices by 11.7% in March over a year earlier.

Beijing might increase bank reserves as often as once a month for the rest of the year while avoiding interest rate hikes until it sees how well the measure is working.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe