Why China’s Central Bankers Are Still Worried

After a tumultuous 2021 marked by near-disaster in the property sector and a widening crackdown on other previously fast-growing industries such as internet technology, China’s economy demonstrated a bit of spark Monday. New figures showed fourth-quarter growth at 4% year over year, slower than the third quarter’s 4.9% but still well above the 3.3% consensus estimate among economists polled by FactSet.

Still, policy makers clearly don’t see much to celebrate: On Monday the People’s Bank of China also announced a 0.1 percentage point cut to two of its key policy rates.

The upbeat data shouldn’t be so surprising, particularly for October and November. Although China’s economy still struggled in the fourth quarter, it benefited from the absence of two big problems from the third quarter: the midsummer Delta variant outbreak and late summer power shortages. Resilient exports supported manufacturing investment, and the slow trickle of monetary easing since July appears to have helped stabilize weak infrastructure investment.

Single-month December data released alongside gross domestic product was largely bad, however, particularly for consumers and the all-important housing sector. Retail sales rose just 1.7% year over year, the weakest growth in over a year. And with China still fighting multiple Covid-19 outbreaks in mid-January—including some linked to the hyper-contagious Omicron variant—the prospects for January and February look bleak too.

More worrying, mortgage lending appears to have retreated in December, after a noticeable bump in November: Growth in seasonally adjusted medium- and long-term loans to households slowed to 9.5% from 14.3% month on month annualized, according to Goldman Sachs. Housing sales also fell back. With infrastructure investment still struggling to accelerate and consumers hunkering down, it is difficult to imagine a floor for overall Chinese growth without more definitive signs of a bottom in real estate.

Even after today’s modest policy rate cuts, monetary easing so far still looks conservative compared with past cycles—and many market rates are still relatively high. More help will be needed to head off a deeper slowdown in the first half of 2022.

For self-employed Australians, navigating the mortgage market can be complex—especially when income documentation doesn’t fit the standard mould. In this guide, Stephen Andrianakos, Director of Red Door Financial Group, outlines eight flexible loan structures designed to support business owners, freelancers, and entrepreneurs.

1. Full-Doc Loan
A full-doc loan is the most straightforward and competitive option for self-employed borrowers with up-to-date tax returns and financials. Lenders assess two years of tax returns, assessment notices, and business financials. This type of loan offers high borrowing capacity, access to features like offset accounts and redraw facilities, and fixed and variable rate choices.

2. Low-Doc Loan
Low-doc loans are designed for borrowers who can’t provide the usual financial documentation, such as those in start-up mode or recently expanded businesses. Instead of full tax returns, lenders accept alternatives like profit and loss statements or accountant’s declarations. While rates may be slightly higher, these loans make finance accessible where banks might otherwise decline.

3. Standard Variable Rate Loan
A standard variable loan moves with the market and offers flexibility in repayments, extra contributions, and redraw options. It’s ideal for borrowers who want to manage repayments actively or pay off their loans faster when income permits. With access to over 40 lenders, brokers can help match borrowers with a variable product suited to their financial strategy.

4. Fixed Rate Loan
A fixed-rate loan offers repayment certainty over a set term—typically one to five years. It’s popular with borrowers seeking predictability, especially in volatile rate environments. While fixed loans offer fewer flexible features, their stability can be valuable for budgeting and cash flow planning.

5. Split Loan
A split loan combines fixed and variable portions, giving borrowers the security of a fixed rate on part of the loan and the flexibility of a variable rate on the other. This structure benefits self-employed clients with irregular income, allowing them to lock in part of their repayment while keeping some funds accessible.

6. Construction Loan
Construction loans release funds in stages aligned with the building process, from the initial slab to completion. These loans suit clients building a new home or undertaking major renovations. Most lenders offer interest-only repayments during construction, switching to principal-and-interest after the build. Managing timelines and approvals is key to a smooth experience.

7. Interest-Only Loan
Interest-only loans allow borrowers to pay just the interest portion of the loan for a set period, preserving cash flow. This structure is often used during growth phases in business or for investment purposes. After the interest-only period, the loan typically converts to principal-and-interest repayments.

8. Offset Home Loan
An offset home loan links your savings account to your mortgage, reducing the interest charged on the loan. For self-employed borrowers with fluctuating income, it’s a valuable tool for managing cash flow while still reducing interest and accelerating loan repayment. The funds remain accessible, offering both flexibility and efficiency.

Red Door Financial Group is a Melbourne-based brokerage firm that offers personalised financial solutions for residential, commercial, and business lending.

Why China’s Central Bankers Are Still Worried

China’s economy grew 4% from a year earlier in the fourth quarter—faster than expected.