Joint Task Group Formed to Devise Measures to Tackle China’s Property Slump

China’s housing ministry, central bank, and several other departments, along with state-owned banks, are forming a joint task group to discuss measures aimed at boosting the property sector [para. 1]. This initiative comes as part of a series of coordinated efforts to stabilize the housing market, with a particular focus on ensuring the completion of unfinished housing projects [para. 2]. The State Council, China's cabinet, is set to hold a policy briefing to unveil these measures, involving various high-ranking officials from the Ministry of Housing and Urban-Rural Development, the National Financial Regulatory Administration (NFRA), the central bank, the Ministry of Finance, local governments, and state-owned banks [para. 3].

Earlier in the month, regulators and banks in Beijing designated specific officials to join this task group, continuing an effort that began in January with the establishment of a coordinated financing mechanism for the property sector [para. 4]. A notice issued by the Ministry of Housing and the NFRA had outlined support for developers based on their qualifications, credit record, and financial condition [para. 5]. Since late March, Chinese banks have approved loans amounting to 520 billion yuan ($72 billion) to fund 2,100 projects listed as eligible by local authorities under this mechanism [para. 6]. A new batch of projects is now being reviewed for similar support [para. 6].

The Politburo's statement in April agreed on the need for "coordinated research" to absorb existing housing stock and optimize the supply of new housing, signaling potential new measures to tackle the ongoing crisis [para. 7]. At the upcoming Friday meeting, officials will discuss refining the coordinated financing mechanism, possibly including projects that don’t meet the current criteria into a third batch of qualifying projects [para. 8]. Notably, some projects on the white list still fail to secure bank loans due to high loan thresholds set by commercial banks [para. 9].

In addition to financing projects, regulators are weighing plans for the government to buy unsold homes and convert them into affordable housing for sale or rent [para. 10]. Shares of Chinese developers surged on speculation about government funds and national policies to purchase homes [para. 11]. Developers and financial institutions suggest it is more practical to purchase existing stock and convert it into affordable housing rather than building new homes, leveraging the central bank’s pledged supplemental lending (PSL) program [para. 12]. This approach would likely involve city-level local governments or government-owned platforms, rather than developers [para. 12].

The creation of a national property platform company or using local platforms similar to local government financing vehicles (LGFVs) is under consideration [para. 13]. Given the immense size of unsold inventories, estimated at around 748 million square meters, industry participants favor a national purchase platform, which presents challenges in design and standard setting [para. 13]. Some cities have already started buying unsold homes for affordable rental housing or buying pre-owned homes from homeowners looking to upgrade [para. 14]. For example, in Zhengzhou, state-owned enterprises have begun programs to buy old houses and help homeowners purchase new properties, but rolling out such programs nationally is challenging due to fiscal pressures faced by local governments [para. 15].

In summary, China is taking coordinated steps involving various regulators, banks, and industry stakeholders to address challenges in the property sector. These measures include ensuring the completion of unfinished projects, financially supporting qualifying projects, and potentially purchasing unsold homes to convert them into affordable housing [para. 1][para. 3][para. 6][para. 11][para. 14].