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Chinese City Blazes Trail With Boosts for Property Developers

Zhaoqing, in Guangdong province, is believed to be the first municipality to introduce guidelines to ease China’s property crisis by helping developers’ liquidity

Officials in some Chinese cities limited access to escrow funds when the economy slowed in the second quarter, sources say.
A $41-billion plan to buy unsold homes from developers has had a cautious response from developers, who say even if they are able to profit from selling completed apartments to the SOEs, local governments may require proceeds be used to finish existing projects rather than to repay debt. Reuters file photo.


A city of 4 million people in southern China has moved to relax rules on property developers’ escrow accounts and boost financial support for the real estate sector.

Zhaoqing, in Guangdong province, is believed to be the first municipality to introduce guidelines specifically to help developers’ liquidity, a move that officials said other cities may follow.

Despite repeated assurances by the Chinese policymakers and regulators to shore up the property sector, developers have said access to funding remained challenging, and many local government authorities were reluctant to ease rules.

In an official announcement this week, Zhaoqing’s housing authority said local regulators should release funds “appropriately” from escrow accounts to developers facing a short-term liquidity crunch.

That would ensure they have sufficient capital to complete project construction.


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More Cities Tipped to Follow Moves

The authority also said developers in stronger financial positions would be able to reduce the amount required for escrow accounts to ease funding pressures.

Echoing pledges by top policymakers, the city urged financial institutions to support the “reasonable” financing need of developers.

“We think these measures, if implemented, are helpful to developers, especially that this is the first time that we see measures targeting … problem developers,” CGS-CIMB Securities head of China research Raymond Cheng wrote in a note.

“We expect to see more local cities to follow suit,” he added.

So far this year, more than 100 cities have introduced regulatory easing measures as an effort to bolster the property market, but most focused on boosting home purchase demand through cuts in mortgage rates, smaller down-payments and subsidies.


  • Reuters, with additional editing by George Russell





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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.


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