China pushes banks to speed approvals of new loans to private
developers, say sources
Send a link to a friend
[March 25, 2024] HONG
KONG/BEIJING (Reuters) - Chinese regulators are pushing banks to speed
up approvals of new loans to cash-starved private property developers,
people with knowledge of the matter said, a bid to revive homebuyer
sentiment that risks denting lenders' asset quality.
The effort uses the "whitelist" mechanism, Beijing's latest support
measure aimed at easing the sector's unprecedented liquidity squeeze and
spurring home purchases, as new home prices fell in February for an
eighth straight month.
Most top domestic banks have so far shied away from significantly
bolstering credit exposure to the crisis-hit sector despite repeated
nudges from Beijing, dashing hopes of a revival in an industry crucial
for the economy.
The property sector in the world's second-largest economy has lurched
from one crisis to another since 2021, after a regulatory crackdown on
developers' high leverage led to a liquidity crisis.
Now the banking regulator wants faster loan approvals for residential
projects under the "whitelist" mechanism, with effect from last week,
the sources said, a demand that Reuters is reporting for the first time.
The sources spoke on condition of anonymity because they were not
authorized to speak to the media on the subject.
![](http://archives.lincolndailynews.com/2024/Mar/25/images/ads/current/peasley_sda_SFARM_2024.png)
The banking regulator, the National Financial Regulatory Administration
(NFRA), did not respond to a Reuters request for comment.
Developers and bank statements say banks have been reluctant to grant
new loans to property projects, while mostly extending maturity and
lowering interest rates of existing loans.
The "whitelist" program covers projects of state-backed and private
developers that need fresh financing of 1.5 trillion yuan ($207.51
billion), one of the sources said.
In last week's directive, the regulator gave banks until the end of June
to finish approval and issuance of all loans, the second source said.
"It reiterated that banks should treat projects backed by private and
state-owned developers equally," the source added.
The instruction followed statements by some bankers that they preferred
to extend credit mainly to the projects of state-owned firms.
[to top of second column] |
![](../images/032524PIX/busine69.jpg)
A woman walks near a construction site of apartment buildings in
Beijing, China, July 15, 2022. REUTERS/Thomas Peter/File Photo
![](http://archives.lincolndailynews.com/2024/Mar/25/images/ads/current/debbiesfloral_lda_030724.png)
"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.
Launched in January, the "whitelist" enables city governments to
recommend suitable residential projects to banks for financial
support, and to coordinate with them to meet project needs.
PRESSURE ON PROFITABILITY
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.
Three of the nation's top five state-owned lenders are set to report
shrinking net income in 2023 when the sector kicks off its earnings
parade this week, while the other two are expected to report subdued
profit growth, LSEG data shows.
A key gauge of profitability, net interest margins, (NIM), are
estimated to be further squeezed to record lows ranging from 1.29%
to 1.74%, the data showed, below a threshold of 1.8% that regulators
see as necessary to reasonable profitability.
Faced with profitability pressure, initially, as part of the "whitelist"
mechanism, banks just adjusted repayment plans on existing loans,
three private developers said, and all the loans were issued only to
projects in bigger cities.
But in a change of attitude after the regulator's instruction, an
executive at a private developer, speaking on condition of
anonymity, said the firm was told by banks that new credit could be
granted as soon as by the end of this month.
(Reporting by Hong Kong and Beijing Newsroom; Editing by Sumeet
Chatterjee and Clarence Fernandez)
[© 2024 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
![](http://archives.lincolndailynews.com/2024/Mar/25/images/ads/current/hartsburggrain_sda_SFARM_2024.png) |