Editor's note: Zhou Jianjun is an associate research fellow at the CEEC Economic and Trade Cooperation Institute, Ningbo University. This article reflects the author's opinions and not necessarily those of CGTN. It has been translated from Chinese and edited for brevity and clarity.

China unveiled out a new package of pro-growth measures on Tuesday, jointly announced by the People's Bank of China (PBOC), the Ministry of Finance, the National Financial Regulatory Administration and other authorities. The package includes rate cuts, expanded coverage of pledged supplementary lending (PSL), higher relending quotas for technological innovation, agriculture, and small enterprises, as well as interest subsidies for residential mortgages. 

Since the second quarter of 2026, China's economy has shown a mix of resilience and challenges. GDP growth moderated from 5.0% in Q1 to 4.3% in Q2, while total retail sales of consumer goods edged up 0.4% year on year in August. In response to the evolving economic conditions, China has rolled out a series of incremental policy measures to provide additionolnal support and reinforce the fundamentals of stable growth.

The defining highlight of the policy is its focus on supportive easing rather than aggressive stimulus, reflecting the perfect balance the Chinese government has struck between stabilizing growth and preventing risks. Unlike the reserve requirement ratio (RRR) and interest rate cuts under the interest subsidy policy in 2024, this policy combination primarily employs structural instruments and fiscal-monetary coordination to enhance transmission efficiency and secure the annual growth target. This restraint is not a sign of policy passivity but rather a calibrated response to current issues. The primary challenge facing China is not an aggregate liquidity shortage but structural pain points and transmission bottlenecks. Consequently, rather than relying on broad-based RRR and interest rate cuts to stimulate the economy, the policy adopts a coordinated package of measures to maximize economic impact with limited incremental policy support.

The second highlight of the policy lies in tool innovation, particularly the debut of central government interest subsidies for commercial mortgages taken out by individual homebuyers. The floor area of each purchased unit must not exceed 120 square meters, and the purchase price must not surpass 1.5 million yuan (about $223722). The policy offers an annual interest subsidy of 1 percentage point, covering loans of up to 1 million yuan, with the subsidy available for a maximum period of five years.

This policy breaks ground in three aspects: First, subsidy funding is split between the central and local governments on a 90:10 ratio to incentivize local authorities and prevent policy implementation from being compromised locally. Second, with benchmark mortgage rates near 3%, a 1-percentage-point subsidy reduces household interest expenses by roughly one-third, easing the burden on homebuyers without squeezing banks' net interest margins. Finally, the four combined eligibility criteria direct policy dividends precisely toward housing serving essential demand in third- and fourth-tier cities, county seats, and outer suburbs of first- and second-tier cities, the exact areas facing the inventory overhang and concentrated demand. Broadly speaking, this marks the central government's first direct allocation of real fiscal resources to stabilize real estate demand in recent years. Its value as a signal deserves far more attention than the reduction in home-buying costs alone.

The third defining feature of the policy is its pronounced structural orientation, directing resources specifically toward new infrastructure and weak sectors. The PBOC cut one-year PSL rate by 25 basis points to 1.5% while expanding its scope to cover the construction of the "six networks," including the water network, the new-type power grid, the computing power network, the next-generation communication network, the urban underground pipeline network and the logistics network. This will unlock additional growth space for infrastructure investment in Q4. 

The central bank has also decided to increase the quota of the relending facility for sci-tech innovation and technological upgrades by 200 billion yuan, with the funding coverage ratio raised from 60% to 100%. By providing lower-cost funding, the PBOC aims to overcome banks' risk aversion and reluctance to lend, thus fostering new quality productive forces. 

Furthermore, the quota of the relending facility to better support agriculture and small and micro businesses were expanded by 500 billion yuan, out of which 300 billion yuan is dedicated to financial support for private firms, thereby bolstering the private sector to help stabilize markets, employment, and business confidence. These details underscore the policy's structural orientation: shoring up weak links while stabilizing market entities, and supporting short-term growth while building momentum for medium- and long-term structural optimization.

The policy sends a deeper signal: stronger government support for the real estate market goes beyond a focus on "stabilizing growth," with greater emphasis now placed on stabilizing expectations and advancing structural transformation. The pace of implementation is also critical, from setting the policy direction at the State Council executive meeting on September 28, to issuing official documents on September 29, and enforcing them on October 1. This rapid sequence fully demonstrates the central government's resolve. Under the framework of high-quality development, targeted structural tools will continue to replace broad aggregate stimulus, forming the central pillar of macroeconomic regulation moving forward.