According to Bloomberg, China is working on a so-called “white list” of construction companies that will make it easier to receive money from banks.
Beijing could allow banks to provide unsecured short-term loans to the 50 companies on the list.
China’s huge real estate sector is in crisis, adding to the country’s economic woes in the wake of the pandemic.
This text was automatically translated from English into German using artificial intelligence. It was checked for accuracy by a real editor before publication.
China is finally starting to do something about the three-year-old real estate crisis that has weighed on the country’s economy, which has been battered by the coronavirus pandemic. According to media reports, Beijing is urging banks to improve financing for construction companies. That reported „Bloomberg“ on Thursday, citing people familiar with the matter. According to this, the authorities could for the first time allow banks to grant unsecured, short-term loans to certain companies.
Chinese property developers do not have to secure loans taken out
A so-called “white list” lists 50 property developers who should be taken into account in the project. According to Bloomberg, these include the troubled real estate giant Country Garden and the state-backed company China Vanke.
The property developers do not have to provide any collateral such as land, real estate or other assets to secure the loans. This will enable real estate companies to repay their debts, the unnamed sources told Bloomberg. If approved, the measure would be the largest that Beijing has taken to date to close the financing gap of 3.2 trillion Chinese yuan, the equivalent of 412 billion euros. This could help complete around 20 million unfinished, already sold real estate units across China, Nomura economists said earlier this month.
China’s real estate sector has been in crisis since the second half of 2021. At that time, a liquidity crisis at Evergrande – once China’s second largest property developer – became public. Other Chinese real estate companies faced similar problems and began to stop making their bond payments, what Raising fears that the crisis could spread to other sectors in the country and around the world.
Expert: China is taking “unusual” stimulus measures
As Beijing tries to curb speculation in the once-thriving real estate market, China finds itself in a difficult position. On the one hand there is the collapse of the real estate sector, on the other hand the country wants to revive its economy. The real estate market, along with related industries, contributes up to 30 percent of the country’s gross domestic product.
China has tried to stimulate demand for real estate. But amid economic uncertainty and falling real estate valuations, consumers simply lack the desire to buy, wrote Rory Green, lead China economist at GlobalData TS Lombard, in a Thursday note obtained by Business Insider.
However, Green believes Beijing is finally starting to take its crisis very seriously: “Officers and officials have finally started to show signs of panic. With the growth target under threat, risks to financial stability and unemployment, they are resorting to greater easing,” Green added. “The rhetoric has changed. A number of relatively aggressive and unusual stimulus measures have come into play.”
Still, not everyone is convinced that Beijing’s “white list” will be the solution to China’s real estate woes. “The White List is still likely to be far from acting as a white knight for the real estate sector, which has a host of obstacles to overcome,” wrote Vishnu Varathan, head of Asia economics and strategy at Mizuho Bank in a statement on Tuesday obtained by Business Insider. First of all, the banks could Lending concerns to struggling construction companies, he added.
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