Officials in China are reportedly planning to reduce the interest rate on existing mortgages. A similar move last year did little to lift consumption because the reduction in mortgage rates was offset by downward adjustments to deposit rates. This left households no better off overall. But we don't expect a full offset this time so there should be some boost to household finances. The PBOC is likely to accompany a cut to mortgage rates with a reduction in reserve requirements to dampen the impact on bank margins.
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