China signals more economic aid after property debt relief
CHINA signalled that more economic support measures are imminent, after authorities took a small step towards supporting the ailing property market by extending loan relief for developers.
Top state-run financial newspapers ran reports on Tuesday (Jul 11) flagging the likely adoption of more property-supportive policies, along with measures to boost business confidence.
Earlier, financial regulators stepped up pressure on banks to ease terms for property companies by encouraging negotiations to extend outstanding loans. The People’s Bank of China (PBOC) and National Financial Regulatory Administration (NFRA) said in a joint statement on Monday that the aim of this is to ensure the delivery of homes that are under construction.
Some outstanding loans – including trust loans due by the end of 2024 – will be given a one-year repayment extension, it said. Previously, the more-generous loan terms were to be applied only to loans that were due by late-May 2023, as part of a 16-point plan unveiled late last year.
China’s real estate crisis is stifling a recovery in the world’s second-largest economy, fuelling expectations for the government to take more steps to revive demand. Home sales resumed declines in June, following a brief rebound earlier this year, adding to pressure on debt-laden developers.
To revive the market, regulators have long been expected to come up with more supportive policies. People familiar with the matter said in June that China is considering a new basket of measures, such as reducing down payments in some non-core neighbourhoods of major cities, lowering agent commissions on transactions, and further relaxing restrictions on residential purchases.
A NEWSLETTER FOR YOU
Tuesday, 12 pm
Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
China Securities Journal, the country’s flagship securities newspaper, said on Tuesday that China is expected to “accelerate” the policy roll-out, in order to promote the stable and healthy development of its real estate market.
In a separate report, it also said the government may introduce measures to boost business confidence among private, state-owned and foreign firms following officials’ recent meetings with company executives.
Meanwhile, Shanghai Securities News cited Wang Qing, chief macro analyst at Golden Credit Rating, as saying that policymakers may take further measures such as relaxing property purchase and mortgage rules, as well as cutting home-loan rates to achieve a soft landing of the real estate market.
A Bloomberg Intelligence gauge of Chinese property shares rose 1.1 per cent on Tuesday morning, paring this year’s decline to 26 per cent. Iron ore futures in Singapore rose as much as 2.2 per cent.
Besides property, other facets of the economy are also showing weakness. Consumer spending is sluggish, exports are flagging, and local government debt is soaring. Data on Monday showed the nation’s consumer inflation rate was flat in June while factory-gate prices fell further, deepening deflation concerns and adding to evidence that the recovery is weakening.
In the statement, the PBOC and NFRA said project-based special loans provided by commercial banks to developers before the end of 2024 would not be classified as higher-risk. They also urged financial institutions to ramp up support to ensure the delivery of construction projects.
“Today’s easing, which focuses on developer financing, is far from enough to stabilise the sector,” said Larry Hu, head of China economics at Macquarie Group, in a note to clients. “After all, credit risk for banks would remain elevated if the housing market stays weak.”
Still, the move may signal that more property steps are coming, he added. “Looking ahead, we expect to see more easing on the demand side, such as lowering the down-payment ratio and easing purchase restrictions.”
Debt pressure
Liu Shui, a researcher with China Index Academy, believes that real estate enterprises are still under great pressure to repay debts and authorities need to increase financing support, Shanghai Securities News reported.
Currently, developers have outstanding bonds of about 2.9 trillion yuan (S$540 billion) on their balance sheet, with nearly one trillion yuan of the debts due within one-year and a maturity wall expected in the third quarter.
Renewed concerns about the property sector have increased pressure in China’s credit market. Declines in high-yield dollar bonds accelerated this month amid debt worries involving major builders Sino-Ocean Group Holding and Country Garden Holdings. Meanwhile, two smaller peers in late June failed to make bond payments.
Leading builder China Vanke said the nation’s home market is “worse than expected”, while Goldman Sachs Group now projects a higher default rate for Chinese high-yield property dollar bonds.
“As long as physical property has lost its investment appeal as an asset class, it will be difficult for homebuyer confidence to reverse and sales to pick up,” Bloomberg Intelligence credit analysts Andrew Chan and Daniel Fan said.
“Some surviving Chinese developers may choose to default or restructure rather than attempt to resolve their debt problems.”
Share with us your feedback on BT's products and services
