China official vows to prevent collective defaults of developers
A TOP Chinese housing official pledged to avoid a cascade of debt defaults by property developers, among the strongest comments yet to cushion an escalating real estate liquidity crisis.
China will “forcefully prevent developers from defaulting on their debts all at once,” Dong Jianguo, Vice Minister of Housing and Urban-Rural Development, said at a conference on Wednesday (Dec 13), state broadcaster China Central Television reported.
Dong is among several officials speaking at the event, held by government think tank China Centre for International Economics Exchanges, immediately after the ruling Communist Party’s annual economic work conference.
Regulators will satisfy the reasonable financing needs of builders and help them to solve short-term cash problems, the vice-minister said. Dozens of developers have missed debt payments since a crackdown on excess leverage in the industry morphed into a severe housing slowdown.
The escalation in rhetoric is unusual because Chinese authorities have largely avoided directly commenting on developer defaults in official statements.
China has used subtle tweaks in language to send policy signals. In July, President Xi Jinping’s official slogan on curbing housing speculation was left out of a statement by the Communist Party’s top decision-making body, underscoring a deeper shift towards supporting the property market.
Since then, China rolled out fresh measures to strengthen developers, adding to a slew of moves over the past year mostly aimed at stoking demand for homes. Such steps have largely failed, with home sales plunging in 18 of the past 22 months. Buyers remain on the sidelines, spooked by construction delays, falling prices and company defaults.
The vice housing minister also differentiated between financially sound and insolvent developers on eligibility to receive government support. Builders that violate regulations and lose operating capabilities should be liquidated under the rule of law, Dong added.
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