China has unveiled a sweeping rescue package to bail out a real estate market mired in a record slowdown and deepening liquidity crunch. The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) jointly issued a notice to financial institutions to ensure the “stable and healthy development” of the property sector. Unlike previous piecemeal steps, the latest notice includes 16 measures, from addressing the liquidity crisis faced by developers to loosening downpayment requirements for homebuyers, according to insiders. As part of the rescue plan, developers’ outstanding bank loans and trust borrowings due within the next six months can be extended for a year, while repayment on their bonds can also be extended or swapped through negotiations.
The move is the strongest sign yet that Chinese policymakers are easing a years-long clampdown on the property sector, one of the biggest drags on the economy. Authorities have sought to defuse the property crisis in the past few months through cutting interest rates, urging major banks to extend CNY1 trillion of financing in the final months of the year, and offering special loans through policy banks to ensure property projects are delivered. China also expanded a key financing support program designed for private firms – including real estate companies – to about CNY250 billion, a move that could help developers sell more bonds and ease their liquidity woes.
One of the biggest policy changes in the latest notice is to allow a “temporary” easing of restrictions on bank lending to developers. China began imposing caps on bank’s property lending in 2021, as authorities sought to tighten the reins on a bubble-prone industry and curb leverage at some of the nation’s largest developers. Banks not meeting the current restrictions will be given extra time to meet the requirements. In addition, regulators encouraged banks to negotiate with homebuyers on extending mortgage repayment.
China’s property sector has at least USD292 billion of onshore and offshore borrowings coming due through the end of 2023. That includes USD53.7 billion in borrowings this year, followed by USD72.3 billion of maturities in the first quarter of next year, the South China Morning Post reports.
