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Bond Market News

PBOC Lines Up $148bn Lifeline for Property Sector

July 29, 2022

In the latest from China, the PBOC is said to be lining up an RMB 1tn ($148bn) lifeline for its distressed property sector, the Financial Times reports. The lifeline will be in the form of loans, starting with about RMB 200bn ($29.7bn) of low-interest loans, at 1.75%, to state commercial banks. The banks in turn will be expected to use these loan proceeds along with their own funds to refinance incomplete real estate projects. Proceeds from the PBOC will also be used to bankroll the purchases of unfinished home projects and complete their construction, and then rent them to boost rental housing activity. Dan Wang, chief economist at Hang Seng Bank China said, “A lot of unfinished residential projects have already been sold out or are located in under-developed cities where home purchase and housing rentals are weak, That limits the number of developments the bailout fund can invest in without suffering a loss.” As per analysts, private developers have a 70% market share, and at least half of them have run into liquidity issues. ANZ estimated in a report that up to RMB 1.5tn ($220bn) of mortgage loans are linked to unfinished residential projects. This is in addition to a real estate fund of up to RMB 300bn ($44bn) set up by China to bailout its ailing developers.

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