In the latest twist in China’s long, drawn-out property crisis, which has seen giant developers such as Evergrande (3333:HKG) and Country Garden (2007:HKG) fall into liquidation, Beijing has relaxed mortgage rules and urged local councils to buy up unsold homes in order to bolster consumer confidence.

The government has removed the nationwide mortgage rate floor for individual buyers of first and second-home purchases and lowered the size of down-payments, while putting up 300 billion yuan (roughly $40 billion) of central bank funding to help state-backed firms to buy unsold properties from builders.

The moves are aimed at reviving sentiment among wealthier Chinese individuals who in the past typically invested their savings in property as a ‘store of value’ rather than funding pensions or investing in stocks after prices seemed to keep rising year after year.

At one stage the property market accounted for a quarter of China’s GDP (gross domestic product), and such was the strength of demand many homes were sold before the developers could build them.

While the announcement last week sent the Chinese property sector index up 10%, adding to its sharp rebound over the last couple of months, according to many analysts the support measures and the funding package are a long way short of what is required to rejuvenate the market.

The fall-out in the sector hasn’t just affected those who bought homes or were looking to buy homes, it has had a huge impact in terms of the number of people employed in the property sector.

According to a local real estate research firm, between 2021 and 2023 around 500,000 people were laid off, not including those employed in the wider construction industry.

Many of these people are young workers in their prime, who are now struggling to find jobs as China’s youth unemployment rate hits 15%.

This has had a knock-on effect on consumption, which the government has sought to build into the primary driver of the economy as it faces increasing tariffs from the US on its exports.  

Meanwhile, the country is launching a charm offensive aimed at global investors with regulators and executives from more than a dozen companies hosting meetings later this week in London and Paris in an attempt to garner foreign interest in the stock market after three years of losses for the benchmark.

Since its January low the MSCI China Index has rallied 32% as the authorities stepped up their efforts to put a floor under the market, and according to the latest Bank of America monthly survey global money managers have been reducing their underweight positions in Chinese stocks.

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