China announced on Thursday the upcoming increase in credits intended for unfinished real estate projects to more than 500 billion euros, unveiling a new round of measures to support the sector and revive the economy.
The housing and construction sector have long represented more than a quarter of the GDP of the world’s second largest economy. It grew at lightning speed over two decades.
But since 2020 it has suffered from a tightening by Beijing of the conditions of access to credit for real estate developers, which has pushed heavyweights in the sector to the brink of bankruptcy. At the same time, housing prices have fallen significantly.
The authorities are still counting on growth of “around 5%” this year, but many analysts consider this objective optimistic, due to the numerous obstacles that the world’s second largest economy is currently facing.
At a press conference Thursday in Beijing, Housing Minister Ni Hong announced that the authorities will notably “increase the credit scale of white-listed projects to 4,000 billion” yuan (517 billion euros) by the end of 2024.
This is almost double the previous figure (around 2.23 trillion yuan).
The “white list” system, announced at the beginning of the year, is a mechanism by which municipalities recommend real estate projects to banks for priority financing.
– 50 million families –
Ni Hong also added that “one million dilapidated housing units (located) in urban villages will be renovated” thanks to the restructuring of financing.
“Urban villages have many safety hazards and poor living conditions. People are eager to make renovations,” he explained.
Chinese leaders, including President Xi Jinping, last month acknowledged new “problems” for the world’s second-largest economy.
The authorities then unveiled a package of recovery measures, one of the most important in several years.
They included reductions in interest rates, particularly for existing property loans, or even relaxations of restrictions on the purchase of housing.
Officials said at Thursday’s news conference that rates on these existing mortgages “will fall on average by about 0.5 points” as part of the reductions.
This “will benefit 50 million families and 150 million residents,” estimated Tao Ling, the deputy governor of the Chinese central bank.
Stimulating demand for housing is one of the authorities’ priorities to ensure a sustainable recovery.
Several large Chinese cities such as Beijing, Shanghai (east), Chengdu (southwest) and Tianjin (north) have relaxed their restrictions on the purchase of real estate in recent weeks.
– “Not really excited” –
China is due to publish quarterly growth figures for the July-September period on Friday. It should be the weakest of the year.
Analysts did not seem convinced that the announcements made at Thursday’s press conference would significantly boost markets.
“They are still trying to talk for nothing, placing even greater emphasis on the stabilization of the real estate sector,” Stephen Innes, an analyst at SPI Asset Management, said in a note.
“The more we progressed in the press conference, the more we saw that the markets were not really excited” by the announcements, he stressed.
“Afterwards, let’s be honest: the disorder that reigns in China in the real estate sector cannot be resolved with a few speeches and shaky measures,” added Mr. Innes.
A group of experts interviewed by AFP expect annual growth of 4.9% for 2024, a result which would still be within the range established by the government but would be one of the weakest in recent years.
