Chinese Regulators Signal Efforts to Resuscitate Real Estate Enterprise Financing


China’s top financial authorities have sent positive signals on the recovery of real estate enterprise financing in the wake of Evergrande Group’s debt debacle last year.

The People’s Bank of China (PBOC), the China Banking and Insurance Regulatory Commission (CBIRC) and the China Securities Regulatory Commission (CSRC) have all addressed the issue of real estate financing and real estate debt at recent specialist meetings.

These regulators have called for “support for rational financing by real estate enterprises” under the precondition of systemic risk prevention and upholding the position that “houses are for occupation, not speculation.”

Analysts say the move sends a clear and positive policy signal that Chinese regulators will seek to bolster up financial access for real estate developers.

On 4 May CSRC said via its official website that it “actively supports bond financing by real estate enterprises,” while on the same date the Shenzhen Stock Exchange said that it “supports regular financing activities by financial enterprises.”

The Shenzhen bourse said that it will allow high-quality enterprises to have further access to bond fund-raising, as well as encourage them to issue corporate bonds for taking over the projects of at-risk property developers.

State-owned media reports that financing conditions for the Chinese real estate sector have improved of late, despite a decline in the overall scope of bond financing.

Real estate development loans increased 290 billion yuan in the first quarter, for an increase of over 441.4 billion yuan compared to the fourth quarter of 2021, according to figures released by PBOC on 6 May.

On 7 May the Guangzhou branch of PBOC said that real estate development loans in Guangdong province increased by 57.9 billion yuan in the first quarter, returning back to a trajectory of growth.

In April Sino-Ocean managed to issue USD$200 million in green bonds offshore, while the scope of securitised products such as asset-backed securities, commercial mortgage-backed securities and real estate investment trusts in China is on the increase.

In the same month PBOC, CBIRC and CSRC also called for “properly providing financial services for the takeover of risk disposal projects for key real estate enterprises.”

As of 8 May, the Chinese real estate sector had seen the issuance of at least 11 real estate takeover financing bonds, raising a total of 7.7 billion yuan.

3 banks and 2 asset management companies (AMC’s) in China have also issued 5 real estate takeover bonds, while the takeover loan quota is in excess of 170 billion yuan.

The participation of AMC’s brings a new channel of funds to the Chinese real estate sector, helping to drive the transfer of assets from at-risk enterprises.