In a new round of incentives for the economy, China has eased rules for property purchase in three of the country’s largest cities – causing the price of iron ore to soar and leading the Shanghai stock exchange to have its biggest rally in 16 years.

For many years, only local residents were allowed to buy homes in these metropolises, a restriction to prevent real estate speculation.

From now on, there will be no more barriers like this in Guangzhou, and there will be no limit to the number of properties people can buy. Shanghai and Shenzen have also relaxed their regulations.

Last week, China had already announced an interest rate cut and a decrease in capital reserves required of banks – as well as a series of measures to stimulate the domestic economy and contain the real estate sector collapse. The government aims for a 5% GDP growth.

Yesterday the People’s Bank of China, the country’s central bank, announced that from November 1st, it will be possible to refinance mortgages, opening up the possibility for renegotiating interest rates on housing loans.

The minimum down payment for home purchases has been reduced from 20% to 15%.

The stock market is responding to the measures. After plunging to its lowest level in five years, the Chinese stock market has seen consecutive highs in recent days.

The CSI 300 index of major stocks listed in Shanghai rose by 8% today, the biggest daily gain since 2008. The increase for the month is 18%.

UBS Wealth Management said in a report that the big question now is whether the recovery will be sustainable.

“Investors considering exposure to China need to know that the scope, scale, and implementation of stimuli are still uncertain – and from an economic growth standpoint, a recovery of fundamentals will likely require further incentives for the real estate sector,” the bank said.

According to analysts at UBS, there is now a greater sense of confidence among investors because Chinese market regulatory institutions have shown a willingness to act in a more coordinated manner.

“We are more optimistic than we were at the beginning of last week because of the increased determination and better policy coordination, but the path ahead will depend on the size of fiscal stimulus and its execution,” wrote the analysts.

According to the Bank of America, “the improvement in policy communication may have impressed more than the measures themselves,” wrote Helen Qiao, BofA’s economist for Asia.

The new incentives caused iron ore to surge by more than 11% today, with the ton returning to over $110 for the first time since July – although still far from the $140 mark in January.

Last week, the ore, which is one of the worst-performing commodities of the year, rose by over 10%.

The rise helped in the recovery of Vale’s shares, which rose by 8% in the last five trading sessions. However, the stock still shows a 16% loss for the year.

The slowdown in the Chinese real estate market has been ruining Chinese steel mills. Three-quarters of them had losses in the first semester, and some may go bankrupt or be bought, according to Bloomberg Intelligence.

According to analyst Michelle Leung, there should be a consolidation movement encouraged by the government. The top five companies are expected to control 40% of the market by the end of 2025, and the top ten are expected to have a 60% share.

Faced with a drop in domestic sales, Chinese companies have increased exports, but face increasing anti-dumping barriers in some markets.

The crisis in the Chinese steel industry is considered deeper and more lasting than the contractions of 2008 and 2015.

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