Xiao Yuanqi, Deputy Director of
China's National Financial Regulatory Administration, emphasized a nuanced
approach for projects facing challenges but with potential for financial
stabilization. Rather than abruptly withdrawing, suppressing, or cutting off
loans, Xiao suggested providing enhanced support by extending existing loans,
adjusting repayment terms, and considering new loans.
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| An artwork juxtaposing Chinese yuan cash bills with the China’s flag |
He specified that the recent easing of financing guidelines for real estate firms is a targeted measure aimed at addressing specific challenges in the sector.
China's distressed real estate
sector requires robust backing from its financial institutions, and they should
refrain from discontinuing financing for projects facing challenges, as
emphasized by a senior Chinese financial regulatory official. This stern message
comes in the wake of the most substantial reduction in mandatory cash reserves
for banks by the Chinese central bank since 2021. Recently, Beijing issued a
new policy directive with the aim of alleviating the liquidity strain on
Chinese developers, who have been grappling with the regulatory crackdown on
the sector's excessive debt.
Deputy Director Xiao Yuanqi of China's National Financial Regulatory Administration conveyed these resolute remarks during a press conference in Beijing on Thursday, emphasizing the indispensable responsibility of the financial industry to provide unwavering support. He underscored the extensive and crucial impact of the real estate industry chain on the national economy and its close connection to people's lives.
The challenges in China's real
estate sector are intricately linked to local government finances, which
traditionally depended heavily on revenue from land sales to developers.
The real estate market experienced
a downturn following Beijing's crackdown on developers' excessive reliance on
debt for expansion in 2020, placing a burden on consumer and overall economic
growth in the world's second-largest economy.
Xiao emphasized the need to avoid indiscriminately withdrawing, suppressing, or cutting off loans for projects facing difficulties but with balanced funds. Instead, he advocated providing increased support by extending existing loans, adjusting repayment arrangements, and introducing new loans.
However, Xiao cautioned that the
recent relaxation of funding guidelines, valid only until the end of the year,
is targeted in its approach. State banks in China are set to issue operational
property loans to real estate companies based on manageable risks and
commercial sustainability.
"Eligible property developers
can utilize these loans to settle existing debts of real estate companies and
redeem open market bonds they have issued," he explained.
Official reports indicate that China's Ministry of Housing and Urban-Rural Development convened a meeting on Friday morning, emphasizing the adaptability of newly released property policy guidelines by local regions as needed. While not a novel occurrence, this meeting is one of several this week, indicating official efforts to expedite the implementation of recent policy announcements.
Wednesday's stimulus announcement
from Beijing marked a noteworthy departure by choosing to disclose the news at
a press briefing, indicating a rare move by the Chinese government. This
suggests a deliberate signaling of intent, particularly as the country's stock
markets hover on the brink of capitulation.
Typically, such policy decisions
are only released online and conveyed through state media channels. However,
the announcement of the forthcoming reserve ratio requirement cut and real
estate policy was made in person by Pan Gongsheng, the Governor of the People's
Bank of China.
This occurrence follows last week's
announcement by Chinese Premier Li Qiang, who revealed the country's annual GDP
growth figure during his address at the World Economic Forum in Davos.
Remarkably, this disclosure took place a day before China's National Bureau of
Statistics was slated to release the official GDP print and other associated
data.
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