After $1.4 trillion package, China to cut homebuying taxes to revive ailing economy

In the latest step to support its ailing economy, China is expected to cut homebuying taxes, according to Bloomberg.

The decision to cut homebuying taxes would come days after the announcement of a $1.4 trillion package to bail out local governments struggling with unsustainably high levels of debt.

The proposals in the work would result in deed taxes being cut from current 3 per cent to 1 per cent in mega cities such as Beijing and Shanghai, according to Bloomberg.

In addition to cutting the deed tax, Chinese mega cities are also expected to scrap the distinction between ordinary and luxury houses, which would substantially lower purchasing costs for people seeking to upgrade their residences, people familiar with the matter told Bloomberg.

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These are the latest in the series of steps that the Chinese regime has taken to boost the struggling economy. In the last quarter, the Chinese economy grew by 4.6 per cent, which was the lowest since last March. This year, China is expected to miss the target of 5 per cent annual growth.

Last week, the Standing Committee of the National People’s Congress (NPC) also raised local government’ debt ceiling to 35.52 trillion yuan, allowing them to issue 6 trillion Yuan in additional special bonds over three years to swap hidden debt, with the option of tapping into another 4 trillion Yuan fund in new special local bond quota over five years, according to Bloomberg.

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In recent months, China has slashed lending rates, eased cash reserve requirements at banks to trigger an uptick in lending, and announced multiple rounds of stimulus packages.

Last month, China also pledged to nearly double the quote for loans for unfinished residential projects to 4 trillion Yuan, but the announce failed to inspire confidence as local governments did not have adequate special bonds to digest around 60 million unsold housing units.

In recent years, Chinese economy has suffered because of the real estate sector that collapsed after 2019 and mounting debt with local governments.