Authorities announced an extension of their support policies aimed at reviving the Chinese property sector. The measures include allowing cash-strapped developers to postpone loan repayments by a year, encouraging negotiations between financial institutions and real estate firms, and providing exemptions from liability for non-performing ancillary financing.
Home Sales Were Under Pressure In June
The prolonged property slump in China has hindered the country’s economic recovery and raised concerns about the overall health of the world’s second-largest economy. Despite previous efforts to stimulate demand, home sales resumed their decline in June, exacerbating the pressure on debt-laden developers.
PBoC and NFRA Outlined New Measures To Support Chinese Property Sector
In a joint statement, the People’s Bank of China (PBoC) and the National Financial Regulatory Administration (NFRA) outlined the new measures. Financial institutions will be incentivized to extend outstanding loans to support the completion of homes currently under construction. Additionally, certain loans, including trust loans due before 2024, will be granted a one-year repayment extension.
The central bank of China aims to increase financial support for the real estate market to ensure the delivery of homes. Newly issued ancillary financing that becomes non-performing will not result in liability for relevant institutions and personnel if due diligence has been exercised.
The extension of the support policy until the end of 2024 indicates the government’s commitment to bolstering the real estate sector. To further incentivize banks to support the construction of unfinished property projects, loans issued before the end of 2024 will not be downgraded. This move aims to alleviate concerns about the potential risks associated with these loans. In addition, banks and their officials who issued loans that later turn sour will be exempted from liability. Measures to the property sector were partly expected by state media.
The extension of support policies, coupled with recent cuts to benchmark loan rates, demonstrates China’s proactive approach in addressing the challenges faced by the Chinese property sector. These measures are expected to have a positive impact on the overall economy, potentially paving the way for a sustainable recovery in the coming years.