China ready to let some troubled property firms go bust: housing minister

Ni Hong says authorities have the arduous task of stabilising the crisis-hit real estate industry this year
Companies that are insolvent or can’t operate must fold or be restructured, Ni says

Two Sessions 2024 (Lianghui)

Shi Jiangtao

Published: 10:00am, 10 Mar 2024

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Beijing will strive to stabilise China’s property market in the midst of a debt crisis and “systemic risks”, while allowing some troubled real estate developers to go bankrupt or be restructured, the country’s housing minister said on Saturday.

On the sidelines of the National People’s Congress, Housing and Urban-Rural Development Minister Ni Hong pointed to further problems ahead as the country struggles to contain the deepening property sector crisis, among other economic woes.

“The task of stabilising the market remains arduous,” Ni said, while insisting that Beijing had maintained its “bottom line” of avoiding “systemic risks” in the sector through boosts to home sales and added liquidity for debt-laden developers.

China’s property sector has been grappling with a liquidity crisis since mid-2021, with major developers defaulting on or delaying debt payments following a regulatory crackdown on high leverage.

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Industry giant China Evergrande Group was wound up in January and competitor Country Garden Holdings is facing a liquidation petition in Hong Kong.

Many others, including China Vanke, the country’s second-biggest real estate firm, struggle to sell flats and raise funds, weighing on the growth of the world’s second-biggest economy.

“It also needs to be emphasised that for real estate companies that are seriously insolvent and have lost their operating capabilities, they must go bankrupt and be restructured in accordance with the principles of the rule of law and marketisation,” Ni said.

“Those who commit acts that harm the interests of the masses will be resolutely investigated and punished in accordance with the law, and they will be made to pay the due price.”

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Ni said that to deal with a funding crunch in the sector, his ministry and the National Financial Regulatory Administration unveiled a plan in January to establish a mechanism to better coordinate with financial institutions to help real estate projects.

According to the minister, the mechanism is up and running in more than 310 cities in 31 provinces across the country to support developers.

Of the more than 6,000 real estate projects on the government’s “white lists” that are deemed eligible for financing support from commercial banks, nearly 83 per cent were from private or mixed-ownership enterprises.

As of the end of February, over 200 billion yuan (US$27.8 billion) in bank loans had been approved.

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State news agency Xinhua reported last month that local governments and financial institutions, including Bank of China, China Construction Bank, Agricultural Bank of China, Postal Savings Bank of China and some joint-stock banks, had been actively implementing such coordination mechanisms.

In his annual government report last week, Premier Li Qiang said China would also quicken the development of a new model for the property sector, focusing on building more affordable housing and meeting a range of demands for homes.

But Ni insisted that the new model would comply with the official line that “housing is for living in, not for speculation”.

“China will focus on planning and building affordable housing, and advancing the construction of public infrastructure for both normal and emergency use and the redevelopment of villages in cities,” he said.