China property: new support measures will ease developers’ liquidity issues in near term, but are not enough to revive sector, analysts say
- New measures will ease developers’ liquidity issues in the near term, but Beijing needs to ‘announce more support measures to help the sector’, CGS-CIMB Securities’s Raymond Cheng says
- Move will have a ‘limited impact on housing demand’: Nomura
According to measures announced jointly by the People’s Bank of China and the National Financial Regulatory Administration on Monday night, firstly, mainland Chinese financial institutions must extend by another 12 months existing loans, including trust loans, given to developers that are due towards the end of next year.
Secondly, commercial banks can classify project-based special loans provided to developers before the end of 2024 in a lower risk category. Moreover, financial institutions or people will not be held accountable for any bad loans related to this policy, if they have already conducted appropriate due diligence.
“The new measures will help ease developers’ liquidity issues in the near term, if implemented,” Raymond Cheng, managing director of CGS-CIMB Securities, said in a note on Tuesday. “Overall, we estimate that loans due by end-2024 could account for some 30-40 per cent of developers’ total debts.”
“Meanwhile, the second measure should allow banks to lend more to developers, as these loans [can be classified] as less risky and personnel involved in the approval of these special loans will not take accountability for any bad debts, if they have conducted appropriate due diligence.”