Chinese regulators boosted support for struggling developers by widening the use of some commercial loans, its latest effort to stem a property slowdown and revive market confidence amid a stock market rout. 

The People’s Bank of China and the National Financial Regulatory Administration will allow bank loans pledged by developers’ commercial properties to be used to repay other loans and bonds, according to a joint notice late on Wednesday (Jan 24). The regulators will permit this easing until the end of the year. 

The announcement comes just hours after the central bank said it will cut the reserve requirement ratio for banks within two weeks and hinted at more support measures to come, underscoring the mounting urgency across President Xi Jinping’s government to shore up the economy and halt a US$6 trillion stock-market plunge.

China’s extended property downturn has been a major headwind for the economy, ratcheting up pressure on developers that are struggling to repay debts and complete projects. It’s sparked a raft of moves from authorities to stem the downward spiral, including relaxed homebuying curbs last month in Beijing and Shanghai, two of the country’s biggest markets. 

The loan measure expands the playbook for finance officials across the country to address the liquidity crisis faced by developers, extending support for loans backed by commercial real estate including offices and malls. Some Chinese developers pledge these assets to secure bank loans, and use them to enhance credit when selling new bonds guaranteed by state-owned China Bond Insurance. 

Among big property firms, Country Garden Holdings defaulted on a dollar bond for the first time in late October. China Evergrande Group, the world’s most indebted developer, narrowly avoided liquidation last month when a winding-up court hearing was postponed, as it struggles to restructure its borrowings. BLOOMBERG

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