Hukou reforms & property, RRR cut, loan repricing

The interest rates on virtually all outstanding loans issued by China’s banks will be renegotiated over the next few months as the PBOC implements the most consequential phase of its efforts to improve its ability to fine-tune monetary conditions. Banks are likely to come under pressure from officials to lower lending rates as part of this shift. Mortgages rates are a key exception: the PBOC has mandated that they not be reduced, which is bad news for developers facing weak sales – and the scrapping of residency controls in smaller cities that was announced last week is unlikely to make much difference. In the week ahead, the December inflation data could bring welcome evidence that the swine fever outbreak is finally being brought under control.