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Beijing is employing a horde of measures to help the embattled China property sector, and a recent report published by state media Xinhua says that a 21-point action plan is in the works to improve the balance sheets of good-quality property developers. The plan includes tasks to prevent risks from spreading to the real estate firms and improve their operating and financing cash flows.
“The action plan is based on the idea of stabilizing the current situation and benefiting the long-term, through short-term targeted measures and medium- and long-term institutional arrangements, to prevent the spread of risks from problematic real estate companies to high-quality real estate companies,” a Chinese official told a local news publication.
Measures to aid China property sector
The ‘Action Plan for Improving the Balance Sheet of High-quality Real Estate Enterprises’ will focus on four aspects — assets, liabilities, equity and expectations — along with the implementation of existing and new policies.
Beijing will provide a financing aid of 450 bn yuan ($67 bn) as well as other debt to help the property sector, which is key to the country’s economic growth.
Under the plan, good quality property developers will see faster disbursing of debt amounting to 150 bn yuan announced previously, while an additional 200 bn yuan of a special fund for deliveries of residential properties is in the works. Additionally, Beijing also plans to another 100 bn yuan in support of the rental housing lending.
Meanwhile, on the liability side, the China property sector will see more cooperation from banks and other lenders for the refinancing of loans and maintaining a steady cash flow for high-quality real estate firms.
However, Beijing has not clarified how it will determine which developers are high quality. State media Xinhua said that Chinese regulators are easing the “three red lines” borrowing restrictions on 30 real estate developers, the names of whom have not been released. The restrictions were first rolled out in August 2021 and restrict the amount of new debt property developers can raise by placing a cap on debt ratios.
The only details that might differentiate a high-quality developer are that they must have a relatively large size, projects across different regions in the country and hold ‘systemic importance’.
The new 21-point plan comes after China rolled out the 16-point rescue plan back in November, and a major concern for property developers has been a liquidity crunch. Official data shows that 70% of the developer’s cash comes from debt and equity financing.
It now seems the property sector is poised for a turnaround, but investment experts are of the opinion that there is still a long way to go before real estate firms are finally out of the woods.
