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Artwork of Chinese Yuan cash banknotes and the Chinese flag
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China’s financial institutions should provide strong support to the struggling real estate sector and not “blindly withdraw” from lending to projects facing difficulties, according to a senior Chinese financial regulator. .
His strongly worded comments come after the People’s Bank of China implemented the largest mandatory reserve reductions for banks since 2021. The Chinese government also recently announced new policy directives aimed at easing the cash crunch for Chinese developers, which are struggling with a crackdown on the sector’s bloated debt.
“The financial industry has an inescapable responsibility, and we need to provide strong support,” Xiao Yuanchi, deputy director of China’s State Financial Supervisory Administration, said at a press conference in Beijing on Thursday, according to a translation by CNBC. Stated.
He added, “Everyone knows that the real estate industry chain is long and involves a wide range of fields. It has an important impact on the national economy and is closely related to people’s lives.”
China’s real estate issues are closely intertwined with local government finances. Local governments typically rely on land sales to developers for a significant portion of their income.
The real estate market slumped after the Chinese government cracked down on developers’ heavy reliance on debt for growth in 2020, leading to consumer growth and widespread demand in the world’s second-largest economy. It weighed on my growth.
“Projects that are in trouble but can balance their finances should not blindly withdraw loans, restrict financing, or terminate financing,” Xiao said. “More support should be provided, including by extending existing loans, adjusting repayment plans and adding new loans,” he said.
Still, Hsiao cautioned that the latest relaxations in funding guidelines are only in effect until the end of the year and are targeted.
“China’s state-owned banks will issue commercial real estate loans to real estate companies based on controllable risks and commercial sustainability,” Xiao said.
“Eligible real estate developers can use these loans to repay existing real estate company loans or open market debt issued by their companies,” he said.
China’s Ministry of Housing and Urban-Rural Development held a meeting on Friday morning and reiterated that localities can adapt the newly released real estate policy guidelines as needed, according to an official report.
Although not new, the meeting is one of several taking place this week, pointing to official efforts to accelerate implementation of recent policy announcements.
The Chinese government’s stimulus announcement on Wednesday was also an unusual decision to announce the news at a press conference, signaling Beijing’s intentions at a time when the country’s stock market is teetering on the brink of capitulation. It suggests.
Such policy moves are typically only published online and disseminated through state media. However, the Governor of the People’s Bank of China, Pan Gongsheng, directly announced future reductions in reserve requirement requirements and real estate policy.
Last week, Chinese Premier Li Qiang announced the country’s annual GDP growth rate in a speech at the World Economic Forum in Davos. The day before, China’s National Bureau of Statistics was scheduled to release the country’s official GDP and other data.
—CNBC’s Evelyn Cheng contributed to this article.
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