An artwork juxtaposing Chinese Yuan cash notes with the Chinese flag
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China's financial institutions should actively support the country's struggling real estate sector and not “blindly” withdraw financing for projects that run into trouble, according to a senior Chinese financial regulator.
His sharply worded comments follow China's central bank's biggest cut in mandatory cash reserves for banks since 2021. Beijing also recently released a new policy mandate aimed at easing cash shortages for Chinese developers reeling from a crackdown on bloated debt of the sector are struggling.
“The financial industry has an inalienable responsibility and must provide strong support,” Xiao Yuanqi, deputy director of China's financial regulator, said at a news conference in Beijing on Thursday, according to a CNBC translation.
“We all know that the chain of the real estate industry is long and covers a wide range of areas. It has an important impact on the national economy and is closely linked to people’s lives,” he added.
China's real estate problems are closely linked to the finances of local governments, as they typically derive a significant portion of their revenue from selling land to developers.
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The property market slumped after Beijing cracked down on developers' heavy reliance on debt for growth in 2020, weighing on consumer growth and broader growth in the world's second-largest economy.
“For projects that are in difficulty but whose funds can be balanced, we should not blindly withdraw loans, suppress loans or cancel loans,” Xiao said. “We should provide greater support by extending existing loans, adjusting repayment terms and taking out new loans.”
Still, Xiao warned that the recent easing of financing guidelines, which is only valid until the end of the year, is targeted.
“China's state banks will provide corporate real estate loans to real estate companies based on controllable risks and economic sustainability,” Xiao said.
“Eligible real estate developers can then use these loans to repay existing loans of real estate companies and open market bonds issued by them,” he said.
According to official reports, China's Ministry of Housing and Urban-Rural Development held a meeting on Friday morning, reiterating that local regions could adjust the newly released real estate policy guidelines as needed.
While nothing new, the meeting is one of several this week – an indication of official efforts to speed up implementation of recent policy announcements.
Beijing's announcement of a stimulus package on Wednesday also marked a rare decision to release news at a news conference, suggesting the Chinese government is signaling its intent at a time when the country's stock markets are on the verge of capitulation.
Such political moves are usually only published online and disseminated through state media. But People's Bank of China Governor Pan Gongsheng personally announced the upcoming reduction in reserve requirements and real estate policy.
Last week, Chinese Premier Li Qiang announced the country's annual GDP growth figures in his address to the World Economic Forum in Davos, a day before China's National Bureau of Statistics was scheduled to release the country's official GDP figure and other data.
— CNBC's Evelyn Cheng contributed to this story.