China’s ‘urban village’ drive gets policy bank loan support

CHINA’S central bank issued 150 billion yuan (S$28.1 billion) in loans to policy banks through its pledged supplementary lending (PSL) facility in January, granting such loans for a second month as part of a push to support its “urban village” plan.

The loans were made to state-owned policy banks – China Development Bank, Export-Import Bank of China and Agricultural Development Bank of China, the central bank said in a statement on Thursday (Feb 1), without saying how the banks would use the loans.

Outstanding PSL loans totalled 3.4022 trillion yuan at the end of January, compared with 3.2522 trillion yuan at end-December, the central bank said.

China Development Bank and Agricultural Development Bank of China will provide credit lines worth 142.6 billion yuan to fund the renovation of “urban villages” in the southern city of Guangzhou, the city government said.

China’s Cabinet outlined plans in July to transform “urban villages” – or underdeveloped areas – in megacities, in a bid to support its troubled property sector and aid the economy.

In December, the central bank made 350 billion yuan in loans via PSL to policy banks – the first monthly rise since late 2022, fanning expectations of increased support for the real estate sector.

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The PSL programme, initiated in 2014, was originally designed to provide support during any property downturn by funding urban redevelopment, pushing up prices in the process.

China relied heavily on PSL loans to support its shanty-town renovation during 2015 to 2018. REUTERS