To help the Chinese real estate sector, which is facing a daunting crisis as companies run out of capital to complete construction projects, Beijing recently ordered its banks to provide financial support to a massive list of real estate projects. This is another case of the Chinese Communist Party attempting to control markets via state power.
On January 5th, 2024, China’s Ministry of Housing and Urban-Rural Development and its National Administration of Financial Regulation jointly issued a “Notice on Establishment of Coordination Mechanisms for Urban Real Estate Financing.” According to the notice, cities at the prefecture level and above are required to establish “coordination mechanisms” for urban real estate financing “with the team leader being the responsible comrade of the city government who is in charge of housing and urban-rural development.” These coordination mechanisms will present financial institutions with lists of real estate projects eligible for financing support within each given administrative region. Financial institutions are to assess the lists and will fast-track credit/financing approval for projects that are in good shape. For projects facing “temporary difficulties” but whose long-term financial outlooks are balanced, financial institutions are instructed to “provide support through extension of existing loans, adjustment of repayment arrangements, and issuing new loans” rather than “blindly withdrawing, suspending, or pressuring existing loans.”
The Xinhua state news agency published an article on February 18 stating that the National Administration of Financial Regulation “held two special meetings to deploy and implement work related to the urban real estate financing coordination mechanism” following initial release of the notice. “By now, most cities have established the coordination mechanism. They have proposed ‘white lists’ of real estate projects and forwarded them to banks.”
According to Xinhua, preliminary data collected by Financial Times (China) showed that 15 commercial banks, including the six major state-owned banks and several joint-stock commercial banks, have engaged financial support for nearly 13,000 projects. The Industrial and Commercial Bank of China (ICBC) has worked on over 2,000 projects, Agricultural Bank of China on over 2,700 projects, and China Construction Bank on over 2,000 projects.
Source:
1. China’s Government Website (Gov.cn), January 5, 2024
https://www.gov.cn/zhengce/zhengceku/202401/content_6925683.htm
2. Xinhua, February 18, 2024
http://www.xinhuanet.com/money/20240218/0688b047bcf246c18b117a962c4a217c/c.html