Caixin
Jan 12, 2023 03:47 AM
FINANCE

China’s Banks Need to ‘Lean Forward’ in Backing Builders, Regulators Say

What’s new: China’s financial regulators urged major lenders at a meeting Tuesday to “lean forward” in extending credit to leading, high-quality builders in 2023 and help them improve their cash flows and balance sheets.

The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) asked major banks to maintain credit support for the real economy and increase support for domestic demand and supply systems.

They also called on financial institutions to provide financial services in infrastructure investment, small and micro enterprises, scientific and technological innovation, manufacturing and green development. The industry should maintain steady and orderly real estate financing and promote overall economic improvement, the regulators said.

The authorities reiterated the principle that “housing is for living, not for speculation” and called for developers to improve cash flows through asset revitalization, debt restructuring, equity financing and accelerating house sales.

The background: China’s property sector, described by Vice Premier Liu He in December as a “pillar” of the economy, has been in crisis for more than a year. Developers have been hobbled by a shortage of funds caused by a slump in home sales and an inability to raise new financing due to government controls on their debt.

The cash crunch has burdened them with unprecedented financial stress that’s forced many into default or lengthy negotiations with creditors to restructure repayment obligations.

In 2022, developers defaulted on 149.6 billion yuan ($22.1 billion) of onshore bonds and $30 billion of offshore bonds, or more than twice the totals for 2021, analysts at GF Securities Co. Ltd. said Monday in a report.

Chinese developers face growing debt repayment pressures as 958 billion yuan ($141 billion) of onshore and offshore bonds come due by the end of this year, data from a property think tank show.

Chinese authorities have rolled out a series of measures to help developers, especially those with lower debt risks, replenish their capital through bank loans, bond issuance, and equity sales on stock markets on the Chinese mainland and in Hong Kong.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)

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