An artwork juxtaposing Chinese Yuan cash bills with the flag of China
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China’s financial institutions should provide strong support to the country’s beleaguered real estate sector and not “blindly withdraw” funding from troubled projects, according to a senior Chinese financial regulator.
His strongly worded comments follow the biggest cut by the Chinese central bank to bank cash reserve requirements from 2021. Beijing also recently released new political mandate was aimed at easing a cash crunch for Chinese developers, which have struggled amid a crackdown on the industry’s bloated debt.
“The financial industry has an undeniable responsibility and must provide strong support,” Xiao Yuanqi, deputy director of China’s National Financial Regulatory Administration, said in Press conference in Beijing on Thursday, according to a CNBC translation.
“We all know that the real estate industry chain is long and includes a wide range of sectors. It has a significant impact on the national economy and is closely related to people’s lives,” he added.
China’s real estate problems are closely intertwined with local government finances, as they have traditionally relied on land sales to developers for a significant portion of revenue.
The property market slumped after Beijing clamped down on developers’ high reliance on debt for growth in 2020, weighing on consumer growth and broader growth in the world’s second-largest economy.
“For projects facing difficulties but whose funds can be balanced, we should not blindly withdraw loans, foreclose loans or cut off loans,” Xiao said. “We should provide more support by extending existing loans, adjusting repayment arrangements and adding new loans.”
However, Xiao warned that the latest easing guidelines, which only apply until the end of the year, are designed to be targeted.
“China’s state-owned banks will issue operational real estate loans to real estate companies based on controlled risks and commercial viability,” Xiao said.
“Eligible real estate developers can then use these loans to repay existing real estate company loans and open market bonds they have issued,” he said.
China’s Ministry of Housing and Urban-Rural Development held a meeting on Friday morning in which it reiterated that local districts could adjust the recently released property policy guidelines as needed. according to official reports.
While not new, the meeting is among several this week — highlighting official efforts to speed up implementation of recent policy announcements.
Beijing’s stimulus announcement on Wednesday also marked a rare decision to release news on a press releasesuggesting the Chinese government is signaling its intent at a time when the country’s stock markets are teetering on the edge of capitulation.
Such policy moves are usually only published online and disseminated through state media. However, the governor of the People’s Bank of China, Pan Gongsheng, announced the impending reduction of the reserve requirement ratio and real estate policy.
Last week, Chinese Premier Li Qiang announced the country’s annual GDP growth rate in his speech at the World Economic Forum in Davos – a day before China’s National Bureau of Statistics is scheduled to release the country’s official GDP printout and other figures .
— CNBC’s Evelyn Cheng contributed to this story.