09 March 2024, China, Beijing: Ni Hong (right), China's Minister of Housing and Rural Development, speaks at a press conference.
Johannes Neudecker | Image Alliance | Getty Images
China will expand the “white list” of real estate projects and accelerate bank lending for these incomplete projects to 4 trillion yuan ($561.8 billion) by the end of the year, the Ministry of Housing announced Thursday.
This was announced by Ni Hong, China's Minister of Housing and Urban-Rural Development, at a press conference, along with officials from the central bank, the Ministry of Finance and the National Financial Regulatory Administration.
A total of 2.23 trillion yuan in loans to whitelisted developers has already been approved. This figure will nearly double to 4 trillion yuan by the end of 2024, according to a senior official from the Financial Regulation Administration.
A “whitelist” initiative launched by China in January allows city governments to recommend housing projects to banks in order to speed up lending. The aim was to ensure completion of unfinished housing projects so that they could finally be handed over to buyers.
Xiao Yuanqi, Vice Minister of Financial Administration, said all commercial housing projects are now eligible to be listed on the whitelist. This move is expected to expand the list. It was not immediately clear how many other projects would receive support. Analysts said the comment did not indicate that all housing projects could be added to the whitelist.
Xiao also stressed that banks should deploy funds “as quickly as possible,” saying they could release the loans in full to developers instead of disbursing them in batches, according to a CNBC translation in Chinese.
The briefing was the latest in a series of high-level government policy announcements aimed at boosting the economy.
In late September, Pan Gongsheng, governor of the People's Bank of China, announced a 50 basis point cut to the amount of cash banks need to hold, known as the reserve requirement ratio or RRR. It also reduced the minimum down payment for second home loans nationwide from 25% to 15%.
Days later, officials at a high-level meeting, chaired by Chinese President Xi Jinping, pledged to “stop the decline in the real estate market and stimulate a stable recovery.”
Disappointing briefing?
Bruce Pang, chief economist and head of Greater China research at JLL, said officials at a news conference on Thursday appeared to be mostly adjusting existing policies. “It will take some time for the improvement in sales volumes and prices to translate into real estate investment and construction.”
Some investors saw the recent flurry of activity as a sign that Beijing was finally ready to take drastic measures to stimulate growth, and were hoping for more stimulus measures from the news conference. As Xiao spoke, China's CSI 300 real estate index fell more than 5%, a sharp reversal from gains of about 8.7% in the previous three trading sessions.
Chi Lu, chief economist at BNP Paribas Asset Management, said volatility in the Chinese stock market is likely to continue as “investors lack conviction that the stimulus package and what has been announced will turn things around.”
Over the weekend, officials from China's Ministry of Finance announced that they will allow local governments to issue more special bonds to purchase land and allow affordable housing subsidies to be used on existing housing stock, rather than just new construction.
Chinese property stocks rose on Monday on the news, with the mainland's Hang Seng Property Index rising more than 2%. Real estate was also the main gainer in the CSI 300 in mainland China, rising nearly 5%.
Since its peak in 2020, the US HMPI has lost more than 80%. In May, Ni told reporters at a press conference that developers “should go bankrupt, should go bankrupt, or be restructured.”
Real estate recession
More than 50 cities across China have introduced policies to boost the real estate market, according to official media citing the Ministry of Housing.
Ahead of the Golden Week holiday, Guangzhou announced that it would remove all restrictions on home purchases. Meanwhile, the governments of Beijing, Shanghai and Shenzhen have moved to ease restrictions on home purchases by non-domestic buyers and lowered minimum down payment ratios.
This large number of measures came after previous measures taken by China led to few meaningful recoveries. New home prices fell in August at the fastest pace in more than nine years, according to data from the National Bureau of Statistics.
The value of new homes sold fell 23.6% in the year through August, slightly better than the 24.3% decline year-to-date through July. Median home prices fell 6.8% in August from the previous month on a seasonally adjusted basis, according to Goldman Sachs.
The real estate sector – which once accounted for more than a quarter of China's economy – has been suffering a painful contraction since 2021, when Beijing launched a crackdown on high debt levels in the sector, causing a large number of developers to default on their debts and leave many behind. Housing projects are incomplete. This has severely dented home buyers' confidence in the market.
— CNBC's Evelyn Cheng contributed to this story.
