China unveils sweeping rescue measures

Chinese authorities have unveiled sweeping measures to rescue the struggling real estate sector as regulators try to offset years of draconian epidemic containment measures and a real estate crackdown that has brought the world’s No. 1 real estate sector to a standstill. 2 economy.

The banking regulator and the central bank issued a set of 16 internal directives on Friday to promote the industry’s “stable and healthy development,” which was verified by Chinese media on Monday.

These include credit support for heavily indebted property developers, financial support for securing project completion and handover to owners, and deferred payment loan assistance for homebuyers.

On the same day, the National Health Commission issued 20 regulations to “optimize” Beijing’s zero-COVID policy, easing certain restrictions to limit the policy’s social and economic impact.

“We see this as the most critical turnaround since Beijing has tightened financing for the property sector sharply,” Lu Ting, Nomura’s chief China economist, wrote in a note. “We think these measures show Beijing’s willingness to reverse most of the financial tightening measure.”

Hong Kong stocks surged more than 3% on Monday after the measures were announced, extending Friday’s rally of more than 7%.

Beijing imposed broad lending restrictions on property developers in 2020, exacerbating their liquidity problems and causing several of the largest companies to default on bond payments.

That has had severe knock-on effects on the sprawling real estate industry, with cash-strapped developer Evergrande, China’s largest developer, and others failing to compete for projects, prompting protests from mortgage boycotts and homebuyers.

According to a document circulated online, these measures emphasize “guaranteeing housing handover” and order the development bank to provide “special loans” for this purpose.

The document requires financial institutions to treat state-owned and private real estate companies equally and to “actively cooperate with distressed real estate companies in risk management.”

The measures also include “an extension of the transitional period to arrange … real estate loans” for struggling developers, and support for “bond financing by high-quality real estate companies”.

“The plan includes financial stabilization measures aimed at preventing large-scale defaults and thus providing a ‘soft landing’,” ANZ analysts wrote in a note.

But analysts warn that the changes – combined with a limited easing of zero-COVID measures – will not lead to an immediate recovery for the struggling industry.

Prices of new homes have been falling for more than a year, while demand has struggled to pick up as ongoing stringent restrictions on the outbreak have dented consumer confidence.

© 2022 AFP

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