For all the recent commentary about how President Xi Jinping is only interested in control (not disputed) and not the performance and growth of the Chinese economy, there is a growing level of official fear about the bleeding black hole in the economy, property.
According to media reports this week the government wants quick action and billions and billions of dollars in new loans to finance the so-called white list drawn up of companies acceptable to the government.
And that money will come from state controlled banks and financial groups – which should be easy, but has proven to be much tougher than thought as the banks grapple with the likely impact of subsidised loans and bailouts will have on their global ambitions and fund raising ability, as well as their all important credit ratings.
In another intriguing report from Reuters said it had been told the “whitelist” program covering state-backed and private developers that need fresh financing to the tune of 1.5 trillion yuan ($US207.51 billion or more than $A310 billion).
Reuters said in its report that the government is pressuring banks and other finance groups to have their new property lending deals wrapped up by June.
That in turn suggests that the near $US300 billion in new funds released by the central bak cutting bank reserve ratios so far this year, has not gone to property companies or buyers but has been soaked up elsewhere in the economy.
Official data for the first two months of this year shows the lack of any new money showing up in the property sector.
Property investment in China fell 9.0% year-on-year in the first two months of 2024, National Bureau of Statistics (NBS) data showed. Property sales by floor area saw a 20.5% slide in January-February from a year earlier, compared with a 23.0% fall in December last year.
The NBS data showed that new construction starts measured by floor area plunged 29.7% year-on-year, after a 11.6% drop in December while
Funds raised by China's property developers were down 24.1%in January and February after a 17.77% drop in December.
The latter figure gives lie to suggestions that the property black hole is stabilising. At the moment new money is the lifeblood for the stricken sector and the fact that the government is now trying to coerce banks to offer financial support in the form of new loans, suggests the problem is not getting better.
Most of the money hasn’t been lent to help stimulate demand, consumption or help small and medium businesses, most has disappeared into the huge Chinese financial system.
Reuters reported earlier this week that the Chinese government is pushing banks to speed up approvals of new loans to cash-starved private property developers.
Reuters says that the effort from financial regulators is using the “whitelist” mechanism, Beijing’s latest support measure aimed at easing the sector’s unprecedented liquidity squeeze and spurring home purchases, to offset the growing weakness in new home prices, which dropped 1.4% in February, double the 0.7% drop in January and the deepest fall for around a year.
China's banking regulator, the National Financial Regulatory Administration, wants faster loan approvals for residential projects under the “whitelist” mechanism, with effect from last week.
Reuters said that is the first time this demand has been reported.
It points out that most of China’s top domestic banks have been reluctant to significantly increase their credit exposure to property, despite the gathering pace of pressure from the government.
In fact banks have not been making new loans to the property sector but merely extending existing credit lines or reducing interest rates.
“The banks are very much aware that they could lose money on these (property) loans. But the decision isn’t entirely up to them,” said Christopher Beddor, deputy director of China research at Gavekal Dragonomics told Reuters.
Chinese banks’ aversion to extending fresh credit to the ailing property sector stems from worries over the impact on their asset quality and profitability, which has already been hit by tepid loan demand and the sputtering economy.
