China steps up efforts to support lending to developers amid mortgage boycott

A woman walks near a construction site of apartment buildings in Beijing, China July 15, 2022. REUTERS/Thomas Peter

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SHANGHAI/BEIJING, July 18 (Reuters) – Chinese regulators have stepped up efforts to encourage lenders to lend to qualified real estate projects as the property sector faces new risks from a widening payments boycott mortgages on unfinished houses.

The China Banking and Insurance Regulatory Commission (CBIRC) told the official industry gazette on Sunday that banks should meet developers’ financing needs when reasonable.

The CBIRC said it believes that with concerted efforts, “all difficulties and problems will be properly resolved”, reported the China Banking and Insurance News.

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The remarks come as a growing number of homebuyers across China have threatened to stop paying off their mortgages for stalled real estate projects, deepening a housing crisis that has already hit the economy. Read more

The latest news has helped banking and real estate stocks recoup some of their recent losses. China’s banking index (.CSI399986), which fell 7% to a more than two-year low last week, rebounded more than 1% on Monday morning. Chinese real estate stocks (.CSI931775) gained more than 2% on the mainland and jumped almost 5% in Hong Kong (.HSMPI).

“I think the Chinese government has the will and the wherewithal to address the issue, and will likely take swift action,” said Mark Dong, co-founder and managing director of Hong Kong-based Minority Asset Management.

“The biggest risk is weakening consumer confidence, which threatens the nascent recovery in property sales.”

Dong expects public developers to step in and acquire troubled projects from heavily indebted private peers, accelerating industry consolidation.

The CBIRC had already committed last Thursday to strengthen its coordination with other regulators to “guarantee the delivery of housing”. Read more

The rebound in Chinese banking stocks was also aided by news that China will accelerate the issuance of special local government bonds to help supplement the capital of smaller banks, as part of efforts to reduce risk in the sector. Read more

In Sunday’s interview, the regulator urged banks to “assume their social responsibility” and actively participate in considering plans to bridge the financing gap and support real estate project acquisitions.

The regulator hoped the moves would help stabilize the property market by allowing stalled property construction to resume quickly and houses to be delivered to buyers early.

Mainland property stocks rebounded strongly in Hong Kong.

Country Garden Holdings Co (2007.HK), Longfor Group (0960.HK) and CIFI Holdings (Group) Co (0884.HK) all jumped more than 6%.

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Reporting by Beijing and Shanghai newsroom; Editing by Hugh Lawson & Shri Navaratnam

Our standards: The Thomson Reuters Trust Principles.

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