Chinese regulators relax some real estate controls

Chinese President Xi Jinping (Getty)

Chinese regulators are easing some restrictions on bond sales by real estate companies and developers, although they are not pulling out completely.

The goal: to limit credit to over-indebted borrowers without completely interrupting lending, the Financial Times reported, citing Zou Lan, head of financial markets at the People’s Bank of China.

“We have asked the big banks to keep home loan issuance stable and orderly,” Zou said.
Chinese developers have borrowed so much money in recent years that regulators fear a credit crunch could weigh on the economy as a whole. By some estimates, a third of all economic activity in China is related to real estate, the FT said.
In January, the People’s Bank of China began limiting loans to developers and home buyers.

But the government has mainly focused on developing developers. In August, the government banned private equity funds from investing in residential development, cutting off a major source of liquidity.
Evergrande was the poster child of the real estate debt crisis. Many believe the government will allow it to go bankrupt. The other companies are also facing liquidity issues.

The mortgage market has also opened up. Loans were up 1% year-on-year last month, the first gain in four months. Mortgage review time has also halved, from about six months in September to less than three months.

Buyers are holding back, however, as prices have fallen in recent months and buyers expect them to continue falling. This could be a challenge for the developers.
Regardless, regulators are not yet ready to hand over, a Beijing-based policy adviser said.

“All of our previous attempts to regulate the housing market have failed because we got out of the revisions halfway,” the adviser said. “This time, the central government is determined to stick to the plan.”

[FT] – Dennis Lynch

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