China has unveiled measures to revive real estate, a crucial sector for its growth but rendered bloodless by a tightening of financing rules and by the pandemic, which has precipitated many promoters on the verge of bankruptcy.
These new measures include in particular credit support.
The Asian giant has experienced a boom in the real estate sector since the liberalization of the market in 1998, in a country where the acquisition of property is often a prerequisite for marriage and an investment.
The promoters were able to develop at high speed thanks to bank loans. But their debt has swelled so much that the authorities have decided to put a stop to it from 2020.
Access to credit for developers has since shrunk considerably, while demand for real estate has taken a nosedive in China amid an economic slowdown and uncertainties related to Covid-19 restrictions.
Many real estate developers are now fighting for their survival, including the former heavyweight in the sector, Evergrande, strangled by a debt estimated last year at some 300 billion dollars.
Real estate in China is a key sector of the economy which weighs, with that of construction, about a quarter of the GDP, and supports an army of low-skilled workers.
In this context, the authorities established Friday 16 new support measures, supposed to offer a breath of fresh air to the sector.
They have not been published, but the main lines were revealed on Monday by the Chinese economic press.
These measures by the central bank and the banking and insurance regulator include credit support to help debt-ridden developers and to complete ongoing projects.
– “A turning point” –
Due to a lack of cash, some real estate groups have ended their work in recent months. And a growing number of furious owners have refused to honor their monthly payments, at the risk of aggravating the crisis and the defaults.
The measures unveiled by Beijing “guarantee” the return of goods and direct banks to provide “special loans” to achieve this end, according to a directive circulating online and cited by Chinese media.
This decision reflects a “turning point” taken by the authorities since their decision in 2020 to tighten access to credit for property developers, said economist Ting Lu of Nomura bank.
“These measures show that Beijing is ready to reverse most of its decisions,” Lu said.
The news caused the Hong Kong Stock Exchange to jump more than 3% on Monday at the opening, where many real estate groups are listed.
Already on Friday, China had announced the relaxation of several anti-Covid measures which are heavily penalizing the economy, including a reduction in quarantine for international arrivals.
The Asian country is the last major economy to maintain a strict health policy against the coronavirus.
This so-called “zero Covid” strategy translates into confinement of neighborhoods or entire cities as soon as positive cases appear, quarantines for infected people but also almost daily PCR tests.
This policy has significant implications for global supply chains and business morale.