May 20, 2024 12:46 am
Beijing Urging Banks to Expedite Real Estate Loans

Beijing officials are urging Chinese banks to speed up loan approvals for struggling property developers in order to avoid a potential “Lehman moment” caused by the ongoing real estate slump in China. For eight months now, home prices have been declining as property values continue to drop and homebuyer sentiment decreases. Unfinished construction projects also remain a concern.

In response, authorities are implementing a “whitelist” mechanism to support cash-strapped developers and boost confidence in the real estate sector. The program, launched last week, covers both state-backed construction companies and private developers who need new financing totaling 1.5 trillion yuan. City governments can recommend residential property development projects to banks for financial support under this program. However, there are concerns that rushing loan approvals could lead to lower loan quality.

By expediting loan approvals for residential construction, officials hope to revitalize the real estate market. Many Chinese banks have been hesitant to increase credit exposure to the struggling property market, which has limited hopes for a real estate rebound and capped economic growth. Weakening consumer sentiment and growth outlooks have also impacted loan demand and business operations for banks in China. It is projected that majority of the top five state-backed lenders will report lower net income for the full-year 2023, reflecting the overall slowdown in the banking sector.

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