JPMorgan says unsecured loans to mainland Chinese developers a ‘risky move’
- China is considering allowing lenders to issue loans backed up by no collateral to some qualified developers
- Authorities are also reportedly finalising a draft list of 50 developers eligible for financial aid that includes Country Garden Holdings and Sino-Ocean Group
Any step by China to allow banks to provide unsecured loans to qualified developers “would be a risky move” for the lenders, according to JPMorgan Chase.
Such a measure “would be negative for banks as it would raise concerns about national service risk and credit risk in the medium term”, analysts including Katherine Lei and Karl Chan said in a note. What’s more, implementation “would be challenging, as banks could circumvent such guidance due to credit risk concerns”.
China is considering allowing lenders to issue loans backed up by no collateral to some builders, which could potentially free up capital for debt repayment, Bloomberg News reported on Thursday, citing people familiar with the matter.
The unprecedented move would be part of a package of new measures to ease China’s ongoing property crisis, which has seen numerous defaults and stoked fears of contagion in financial markets.
Authorities are also reportedly finalising a draft list of 50 developers eligible for financial aid that includes Country Garden Holdings and Sino-Ocean Group.