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Bond Market News

China Seeks to Spur Property Sector by Boosting Bank Lending and Offering Tax Incentives

October 3, 2022

The People’s Bank of China (PBOC) has told six of its largest state-owned banks to provide at least CNY 600bn ($85bn) in funding to the state’s troubled real estate sector, according to Bloomberg. In the last four months of 2022, the banks which include ICBC and China Construction Bank (CCB) are to extend no less than CNY 100bn to spur residential sales and support developer’s construction projects. The banks have also been urged to purchase bonds issued by developers. Additionally, the Chinese government is offering tax incentives for residential purchases, intended to bolster residential sales. Residents will be able to enjoy personal income tax refunds if they buy a new home within a year after selling their old homes.

These measures are a new wave of initiatives from the Chinese authorities to reverse the slump in the housing market and to inject liquidity in a sector that is seeing increasing defaults and restructuring. Previously, residential mortgage rates were already lowered and the government had committed to the completion of delayed construction projects by issuing special loans.

In related news, Sunac China fulfilled its obligations on one of its onshore bonds by paying out CNY 410mn ($57.6mn) in principal and coupon payments. This comes after attempting to extend repayment previously for the third time by another six months, as per Reuters. The developer is currently undergoing debt restructuring of its offshore debt after defaulting on them earlier this year. Sunac China’s dollar bonds are currently trading at distressed levels of ~14-21 cents on the dollar.

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