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HomeFinance NewsChina urges banks to expedite loans for private developers: Reuters

China urges banks to expedite loans for private developers: Reuters

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Chinese regulators are pushing banks to accelerate the approval process for new loans to financially strained private property developers in an effort to revitalize homebuyer sentiment. This move, utilizing a “whitelist” mechanism, aims to alleviate the liquidity squeeze in the property sector and stimulate home purchases, especially as new home prices have been declining for eight consecutive months. Despite Beijing’s nudges to increase credit exposure to the struggling sector, most top domestic banks have been cautious, impacting the sector crucial to China’s economy.

The property industry in the world’s second-largest economy has been grappling with crises since 2021 due to regulatory crackdowns on developers’ high leverage, leading to a liquidity crisis. The National Financial Regulatory Administration is now urging faster loan approvals for residential projects under the “whitelist” mechanism, effective immediately. While banks have been hesitant to issue new loans for property projects, recent instructions from regulators have prompted a change in attitude, with the possibility of new credit being granted to eligible projects by the end of the month.

This push for faster loan approvals comes amidst concerns about the impact on banks’ asset quality and profitability, particularly as three of the nation’s top five state-owned lenders are expected to report shrinking net income in 2023. As Chinese banks face pressure on profitability, the implementation of the “whitelist” mechanism has led to adjustments in repayment plans for existing loans, with a shift towards granting new credit to projects in larger cities. The regulatory intervention is signaling a potential shift in the lending landscape for the property sector in China.

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