China tells banks to extend loans to property developers amid protests

China tells banks to extend loans to property developers amid protests
A man works at a construction site of apartment buildings in Beijing, China, July 15, 2022. REUTERS/Thomas Peter

Even though the debt-laden Evergrande hasn’t been as widely mentioned in the headlines lately, the industry’s woes and struggles are still very much ongoing. A boycott around China has been growing, with homebuyers refusing to repay their mortgage because of stalled property projects. But the issue is that many of these real estate developers built on debt and are struggling to generate the cash they need to repay their bank loans. The contractors and suppliers need to build out the properties and, therefore, deliver these homes. Last Thursday, officials tried to ease worries about the situation by saying that they would “guarantee the delivery of homes," but investors kept selling banking and developer shares and bonds.

On Sunday, they again tried to ease worries, with regulators urging banks to extend loans to these property developers, saying they should meet their financing needs within reason and work with local governments so that “all the difficulties and problems will be properly solved."

Key comments:

“The CBIRC keeps a keen eye on this issue and strengthens coordination with the Ministry of Housing and Urban-Rural Development and the People’s Bank of China and other government departments to support local efforts to guarantee home deliveries and ensure people’s livelihoods and stability," a CBIRC official remarked, largely repeating Thursday’s remarks, according to Chinese state media outlet Global Times.

“Things will get worse before they get better," said research group Gavekal Dragonomics’s Xiaoxi Zhang. “China has been determined to curb the leverage [taken on] by property developers, and the government will still try to refrain from providing liquidity to them in a big scale. It will take time for some more targeted measures to be issued."
“We don’t have any other way to voice at the moment, and we’re still in a desperate situation," said a homebuyer in Zhengzhou.