Chinese authorities will strive to stabilize China’s property market in the midst of a debt crisis and “systemic risks”, while allowing some troubled real estate developers to go bankrupt or be restructured, Ni Hong, Minister of Housing and Urban-Rural Development said. “The task of stabilizing the market remains arduous,” Ni said, while insisting that Beijing had maintained its “bottom line” of avoiding “systemic risks” in the sector through boosts to home sales and added liquidity for debt-laden developers. China’s property sector has been grappling with a liquidity crisis since mid-2021, with major developers defaulting on or delaying debt payments following a regulatory crackdown on high leverage.
China Evergrande Group was wound up in January and competitor Country Garden Holdings is facing a liquidation petition in Hong Kong. Many others, including China Vanke, the country’s second-biggest real estate firm, struggle to sell flats and raise funds, weighing on the growth of the economy. “It also needs to be emphasized that for real estate companies that are seriously insolvent and have lost their operating capabilities, they must go bankrupt and be restructured in accordance with the principles of the rule of law and marketization,” Ni said. “Those who commit acts that harm the interests of the masses will be resolutely investigated and punished in accordance with the law, and they will be made to pay the due price.”
Ni said that to deal with a funding crunch in the sector, the Ministry and the National Financial Regulatory Administration unveiled a plan in January to better coordinate with financial institutions to help real estate projects. The mechanism is up and running in more than 310 cities in 31 provinces across the country to support developers. Of the more than 6,000 real estate projects on the government’s “white lists” that are deemed eligible for financing support from commercial banks, nearly 83% were from private or mixed-ownership enterprises. As of the end of February, over CNY200 billion in bank loans had been approved. State news agency Xinhua reported last month that local governments and financial institutions, including the Bank of China (BOC), China Construction Bank (CCB), Agricultural Bank of China (ABC), Postal Savings Bank of China and some joint-stock banks, had been actively implementing such coordination mechanisms.
In his annual government report last week, Premier Li Qiang said China would also quicken the development of a new model for the property sector, focusing on building more affordable housing and meeting a range of demands for homes. But Ni insisted that the new model would comply with the official line that “housing is for living in, not for speculation”. “China will focus on planning and building affordable housing, and advancing the construction of public infrastructure for both normal and emergency use and the redevelopment of villages in cities,” he said, as reported by the South China Morning Post.
