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Three China Banks Offer Billions to Vanke, Other Developers

Three state banks said on Wednesday they would provide hundreds of billions of yuan in credit to Vanke, Longfor and other debt-laden developers to support the embattled sector


Vanke, the country's second biggest builder by sales, has been given a $14bn lifeline by a state bank.
A Vanke sign is seen above workers at a building site in Dalian. Vanke, the country's second biggest builder by sales, has been given a $14bn lifeline by a state bank. File photo by Reuters.

 

State banks in China are starting to get serious about helping developers to end the prolonged crisis in the property sector.

Three of China’s biggest commercial banks have agreed to provide large funding support to developers, including industry giant Vanke.

The moves come in response to Beijing’s call to ease pressure on debt-laden developers to end the housing slump.

China’s Bank of Communications (BoCom) said on Wednesday it would provide a 100 billion yuan – close to $14 billion – credit line to Vanke, the country’s second largest developer by sales.

It also agreed to a 20-billion yuan line of credit to Midea Real Estate Holding, the bank said.

Under the agreements, BoCom is likely to offer the two developers property development loans, loans for merger and acquisition deals and bond investments.

The agreement is part of the bank’s efforts to implement 16 measures outlined by Chinese regulators to support the property sector, it said in the statement.

“BoCom will continue to fulfill the responsibility of a state-owned bank, (and) accurately promote high-quality economic development with high-quality financial services,” it said.

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Midea Also Gets Credit Line

Also on Wednesday, Agricultural Bank of China (AgBank) said it has signed strategic agreements to provide fundraising support to five property companies, including Vanke, Longfor Group Holdings and China Resources Land. The bank did not give further details on the scale of the support.

Bank of China also said on Wednesday it agreed to provide a line of credit of up to 100 billion yuan to Vanke.

China’s property sector, once a pillar of growth, has slowed sharply this year due to government efforts to restrict excessive borrowing by developers.

The clampdown has triggered falls in property investment, sales and prices, and a growing number of bond defaults. Construction of many housing projects has stalled, scaring away potential home buyers.

Chinese authorities have announced a flurry of fiscal measures recently to ease the developers’ liquidity crisis.

In the latest policy move, China’s central bank will provide 200 billion yuan in loans to six commercial banks for housing completions, according to a deputy central bank official quoted by the state-run Economic Daily on Monday.

In response to Beijing’s policy guidance, more banks are expected to sign agreements with developers to increase real estate loan issuance, said Liu Shui, an analyst at China Index Academy.

Many analysts, however, believe the property market will take a long time to recover.

“(A) broad recovery in new-home sales remains the key for a sustained improvement in developers’ liquidity profiles,” a Fitch Ratings report said on Wednesday.

“We expect no material improvement in the operating environment, as homebuyers’ confidence remains fragile amid weak economic prospects and uncertainty surrounding delivery of pre-sold properties,” the Fitch report said.

 

  • Reuters with additional editing by Jim Pollard

 

NOTE: This report was updated with new details and the headline changed on Wednesday November 23, 2022.

 

 

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China Property Bonds Being Shunned Over Default Danger

 

China Regulator Seen Checking Banks’ Property Loan Exposure

 

Asia-Focused Funds Snared by Deepening China Property Crisis

 

 

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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