China urges banks to maintain stable property financing

Bloomberg

China’s financial regulators have asked banks to stabilise lending to property developers and construction firms, the latest effort by policymakers to turn around the real-estate crisis and bolster economic growth.
Authorities support the “reasonable” extension of existing real estate development loans and trust loans, according to a statement posted on the People’s Bank of China’s (PBOC) website after a Monday meeting with commercial banks. The gathering was jointly organised by the central bank and the banking regulator.
The regulators reiterated that the “reasonable” demand of home buyers for mortgages will be met. A key financing support program must be “used well” to help private property developer sell bonds, while legal protection and regulatory policy support for special loans aimed at ensuring housing project delivery will be improved to promote the stable and healthy development of the market, the statement said.
The call is the latest in a slew of actions taken by the government to try to stop the more than year long slump in the real estate market that’s dragging down China’s economic growth and undermining local government income.
Bond defaults by cash-strapped developers have sent shockwaves across the financial markets, while delays in property project delivery have driven homebuyers to stop mortgage payment in protest.
In a possible sign of willingness to shift away from the previous tightening stance on the real estate sector, PBOC Governor Yi Gang emphasised on Monday that the industry is critical for the economy.
The details in Monday’s meeting are similar to a 16-point package authorities rolled out earlier this month to help embattled developers, who have at least $292 billion of onshore and offshore borrowing maturing through the end of next year.
The push followed regulators’ orders for banks to dole out hundreds of billions of yuan in financing for developers in the remainder of this year.

Adding to the positive messages sent by the authorities, Yi Huiman, chairman of the China Securities Regulatory Commission, said at the same event that his agency will support property developers’ reasonable bond financing needs and support mergers and
acquisitions in the sector.
The remarks by Yi Gang are “a rare recognition of the property sector’s irreplaceable significance” by a top financial official, according to Lu Ting, chief China economist at Nomura in Hong Kong. The government’s recent supportive policies “demonstrate that Beijing is willing to reverse most of its financial tightening measures,” he added.
At the meeting on Monday, the PBOC and the China Banking and Insurance Regulatory Commission also urged banks to expand medium- and long-term lending to help policy bank financing drive effective investment. Credit demand from manufacturers and service providers should be supported via the special relending loan program for equipment upgrading, the regulators added.
Yi said at the forum that the outstanding size of the relending programs targeting sectors such as technology innovation, transport and logistics and equipment upgrading is about 3 trillion yuan ($419 billion), adding they will be ended after policy goals are reached.
A Bloomberg gauge of Chinese developers’ stocks ended the day 2% lower, after sinking as much as 4% in the morning. The Shanghai Stock Exchange Property Index closed 0.5% lower after earlier being down 2.7%.
PBOC Deputy Governor Pan Gongsheng and CBIRC Vice Chairman Xiao Yuanqi made comments at the Monday meeting, which was attended by heads of institutions including the major state-owned banks, joint stock lenders, and the branches of the central bank and the banking regulator, according to the statement.