Joint Task Group Formed to Devise Measures to Tackle China’s Property Slump
China’s housing ministry, together with the central bank, several other departments, and state-owned banks, is forming a joint task group to discuss measures to boost the country’s struggling property sector [para. 1]. A policy briefing will be held by the State Council to address policies ensuring the delivery of unfinished housing projects. This meeting will include officials from the Ministry of Housing and Urban-Rural Development, the National Financial Regulatory Administration, the Ministry of Finance, and state-owned banks, where property sector measures will be announced [para. 2][para. 3].
Designated real estate sector officials from various regulators and banks have been included in the task group in Beijing. This group is an extension of an already established coordinated financing mechanism for the property sector, which began in January [para. 4]. According to a notice issued by the Ministry of Housing and Urban-Rural Development and NFRA in January, regulators will select qualifying projects for targeted support based on developers’ qualifications, credit records, and financial conditions [para. 5].
Since late March, Chinese banks have approved loans totaling 520 billion yuan ($72 billion) for 2,100 projects listed on a “white list” for funding under the mechanism. The authorities are now reviewing projects for the second batch of the list [para. 6]. The Politburo also issued a statement on April 30, emphasizing the need for policies to absorb existing housing stock and improving new housing supply, which hinted at upcoming measures to tackle the housing crisis [para. 7].
Discussions at the Friday meeting will include how to implement the coordinated financing mechanism and consider a third batch of projects that do not meet the white list criteria [para. 8]. Analysts have pointed out that some white-list projects are ineligible for bank loan approval because of the thresholds set by commercial banks [para. 9]. There are also proposals for the government to purchase unsold homes and convert them into affordable housing for sale or rent, though the funding sources for such plans remain a key concern [para. 10].
Shares of Chinese developers surged amid speculation that the government would provide low-cost funds and national policies to purchase homes [para. 11]. Industry figures suggest that, rather than constructing new affordable housing, it would be more effective to buy existing stock and convert it into affordable housing, possibly through the central bank’s pledged supplemental lending (PSL) program [para. 12]. However, the entities more likely to participate in such programs would be city-level local governments or government-owned platforms rather than developers [para. 13].
Regulators are still deciding between establishing a national property platform company or using local platforms like local government financing vehicles (LGFVs) to purchase homes. Due to the significant volume of unsold inventories at about 748 million square meters, an industry consensus leans towards a national purchase platform, although creating such a platform and standardizing acquisition protocols remain complex challenges [para. 14][para. 15]. Some cities are already exploring these ideas, with programs to buy unsold homes for rental housing or acquiring pre-owned homes from homeowners upgrading to new properties [para. 16].
Instances of such initiatives can be seen in Zhengzhou (Henan province) and Zhangzhou (Fujian province). For example, Zhengzhou Urban Development Group Co. Ltd., a state-owned enterprise, has been tasked with buying 5,000 old housing units and assisting homeowners in purchasing new properties [para. 17]. However, due to the fiscal pressures faced by local governments, it is challenging to implement these programs nationwide [para. 18].
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