China has announced plans to nearly double its credit support for a select group of housing projects, raising it to 4 trillion yuan ($562 billion). This initiative is part of an official effort to revitalize the country’s property sector and boost the economy. The “whitelist,” introduced in January, consists of projects and developers eligible for further financing from local and state-owned banks to aid in completing unfinished developments.
To date, approved loans for these whitelisted projects total 2.2 trillion yuan for this year, according to Housing Minister Ni Hong. The minister, speaking at a press conference in Beijing on Thursday, stated that the new funds should be allocated by the end of the year to enable developers to finalize construction. Ni expressed confidence in successfully ensuring housing deliveries.
This expansion of credit support aligns with recent efforts from Beijing to restore confidence in the Chinese economy. A prolonged slowdown in the property sector, combined with weak consumer demand, has led to calls for increased fiscal stimulus. In September, authorities introduced measures to support the sector, such as reducing borrowing costs and easing restrictions on second-home purchases. These steps, alongside efforts to boost the stock market, have fueled hopes of significant intervention.
The government, led by Xi Jinping, initially intervened to decrease leverage in the property sector in 2020. However, it has so far refrained from announcing direct stimulus measures, opting instead to encourage China’s state-owned banks to extend more credit. Previous initiatives include unveiling bank credit lines in November 2022 and a May plan to mobilize state-owned enterprises to purchase unsold housing, though the extent of bank involvement remains unclear.
Despite these measures, Chinese property developers listed in Hong Kong fell short of investor expectations on Thursday. The Hang Seng Mainland Properties index dropped 3.4%, with KE Holdings and Longfor Group experiencing significant losses.
Zerlina Zeng, head of Asia credit strategy at CreditSights, expressed that banks might be hesitant to provide additional funding for incomplete home projects due to the associated credit risks. She noted that a significant portion of the funds lent up to August through the whitelist program was used to refinance existing debt.
Jeff Zhang, an analyst at Morningstar, predicted an increase in the speed of execution, with more distressed developers receiving funds for home completions, which should help boost homebuyers’ confidence. China’s housing market remains primarily dominated by newly constructed homes purchased before completion, although purchases have shifted towards existing properties this year amid concerns over developers’ financial health.
On Thursday, the housing minister reported a “clear increase” in the number of viewings and purchases of new homes since the end of September, along with a continued rise in transaction volume in the secondary market. According to Reuters calculations, new home prices in August experienced their fastest decline in nine years, with a 5.3% drop across major cities.
This article included additional reporting by William Sandlund in Hong Kong.