China banks pledge R530bn support for beleaguered property sector

Beijing — Three of China’s biggest commercial banks have agreed to provide at least 220bn yuan (about R530bn) in credit to property developers, including industry giant Vanke, in a co-ordinated effort to support the country’s embattled property industry.

The banks’ moves come after government calls to ease pressure on debt-laden developers and reverse a housing slump in the sector, which accounts for about a quarter of China’s economy.

Bank of Communications (BoCom) will provide a 100bn yuan line of credit to Vanke, the country’s second-largest developer by sales, and 20bn yuan to Midea Real Estate Holding, according to separate statements from the lender.

Under the agreements, the bank is likely to offer the two developers property development loans, loans for M&A and bond investments.

The agreement is part of the bank’s efforts to implement 16 measures outlined by regulators last week and published on Wednesday that aim to boost liquidity in the property sector, the bank said in the statements.

“BoCom will continue to fulfil the responsibility of a state-owned bank, [and] accurately promote high-quality economic development with high-quality financial services,” it said.

Also on Wednesday, Agricultural Bank of China (AgBank) said it signed agreements to provide funds to five property companies, including Vanke, Longfor Group Holdings, and China Resources Land. It didn’t give details on the scale of the support.

Bank of China, meanwhile, said it would provide credit of as much as 100bn yuan to Vanke.

China’s property sector has slowed sharply this year after government efforts to restrict excessive borrowing by developers. Construction of many housing projects stalled after liquidity issues at Evergrande, which defaulted on a bond payment, swept across the industry.

More to come

Chinese authorities have announced a flurry of fiscal measures recently to ease the developers’ liquidity crisis. In the latest policy move, China’s central bank will provide 200bn yuan in loans to six commercial banks for housing completions, the state-run Economic Daily reported on Monday, citing a bank official.

In response to Beijing’s policy guidance, more banks are expected to sign agreements with developers to increase real estate loan issuance, said Liu Shui, an analyst at China Index Academy.

Still, analysts reckon the property market will take a long time to recover.

“A broad recovery in new-home sales remains the key for a sustained improvement in developers’ liquidity profiles,” Fitch Ratings said in a report on Wednesday.

“We expect no material improvement in the operating environment, as homebuyers’ confidence remains fragile amid weak economic prospects and uncertainty surrounding delivery of pre-sold properties.”

Reuters