Chinese authorities have unveiled sweeping measures to rescue the struggling property sector, as regulators seek to offset years of harsh pandemic curbs and a real estate crackdown that have stalled the world’s No 2 economy.
The banking regulator and central bank issued a 16-point set of internal directives to promote the “stable and healthy development” of the industry.
The measures include credit support for debt-laden housing developers, financial support to ensure completion and handover of projects to homeowners, and assistance for deferred-payment loans for homebuyers.
The plan came on the same day the National Health Commission issued 20 rules for “optimising” Beijing’s zero-Covid policy, where certain restrictions were relaxed to limit the policy’s social and economic impact.
Hong Kong and Chinese stocks surged on Monday as news of the property measures filtered out. The Hang Seng index was up by as much as 3.0%, while China’s CSI added as much as 1.6%.
“We view this as the most crucial pivot since Beijing significantly tightened financing of the property sector,” wrote Ting Lu, chief China economist at Nomura. “We believe these measures demonstrate that Beijing is willing to reverse most of its financial tightening measures.”
Beijing imposed widespread lending curbs on property developers in 2020, which exacerbated their liquidity issues and caused several of the largest to default on bond payments.
The knock-on effects on the massive real estate sector were severe, with cash-strapped developer Evergrande – China’s largest – and others failing to compete projects, leading to mortgage boycotts and protests from homebuyers.
The new measures emphasised “guaranteeing the handover of buildings”, and ordered development banks to provide “special loans” for the purpose, according to a copy circulating online.
The document ordered financial institutions to treat state-owned and private real estate enterprises equally and told them to “actively [cooperate] with distressed real estate enterprises in risk management”.
The measures also included extending real estate loans for distressed developers.
“The plan includes financial stability measures that aim to prevent massive defaults and hence provide a ‘soft landing’,” ANZ analysts wrote in a note.
But analysts cautioned that these changes – alongside the limited loosening of zero-Covid measures – would not cause an immediate recovery for the ailing sector.
New home prices have been dropping for more than a year, while demand is struggling to pick up owing to ongoing strict pandemic controls that have dampened consumer confidence.