China Pressing Banks to Expedite Loan Approvals to Cash-Strapped Private Property Developers

By Trisha Andrada

Mar 26, 2024 04:23 AM EDT

The aerial view shows residential buildings under construction by Chinese real estate developer Vanke in Hangzhou, in eastern China's Zhejiang province on March 15, 2024.
(Photo : STR / AFP via Getty Images)

Chinese officials are reportedly pressuring banks to approve new loans to private property developers more quickly to alleviate cash shortages.

According to those in the know, this move is to stimulate homebuyer sentiment, which may negatively impact lenders' asset quality.

China's Real Estate Market Has Seen Many Crises

As new house prices declined for an eighth consecutive month in February, Beijing's newest support tool to ease the sector's extraordinary liquidity pressure and boost home purchases is the "whitelist" system.

Introduced in January, the "whitelist" allows local governments to submit acceptable residential projects to banks for financial assistance and work with them to satisfy project demands.

Beijing has repeatedly urged major domestic banks to increase their lending exposure to the crisis-hit sector, but they have avoided doing so so far. This ends the prospects of a rebound in an industry vital to the economy.

The world's second-largest economy's real estate sector has experienced repeated crises since a liquidity crisis in 2021 brought about by a government crackdown on developers' excessive borrowing.

READ NEXT: China Looks Into PwC's Role in Evergrande's $78 Billion Fraud Scandal

Banking Regulator Urges Faster Home Loan Approvals

According to Reuters' sources, the banking regulator has recently demanded quicker loan approvals for residential projects under the "whitelist" system.

According to developers and bank records, banks have hesitated to lend money to new real estate projects. Instead, they have been extending the terms of existing loans and reducing their interest rates.

One source added that the "whitelist" initiative includes projects funded by the state or private developers that require new funding of 1.5 trillion yuan ($207.51 billion). Another person said the regulator mandated last week that banks complete the approval and issue of all loans by the end of June.

READ MORE: Foreign Investors On Alert As China Unusually Withdraws Cash From Banks

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