China to provide $29 billion in special loans to complete housing projects
Thousands of middle-class Chinese have been caught between a rock and a hard place after making down payments for properties that cash-strapped developers are struggling to complete as they take more down payments to get started new projects, thus creating a Ponzi-like scheme.
Currently, the news that China is preparing to issue 200 billion yuan ($29 billion) in special loans to help struggling developers complete their projects has been reported by Caixin.
China’s beleaguered property sector will get a much-needed boost thanks to Beijing’s largest financial commitment to date in a bid to contain the property crisis that has led to plummeting property prices and sales. real estate.
In addition, China Development Bank and China Agricultural Development Bank will be channeled through which these loans will pass, with the explicit purpose of being used for homes that have already been sold but not yet completed.
In short, the prolonged housing downturn has put significant pressure on the growth of the Chinese economy, with the pace of GDP gains in the second quarter of 2022 being the slowest since the Covid outbreak in Wuhan.
Meanwhile, in a note to clients, Jizhou Dong and Stella Guo, analysts at Nomura Holdings Inc., Express their positive feeling towards special government loans.
“We view the central government’s introduction of bailout funding as the first significantly positive development in the past five to six weeks.”
Easing of restrictions
Just a few weeks ago, China unveiled a multi-pronged approach to help the real estate sector; however, youth unemployment and cash shortages are weighing heavily on its growth prospects, with forecasts that growth in 2022 will be below 5%.
In addition, the authorities have tried various measures to stimulate the real estate sector by reducing down payments and helping families with several children to buy more properties.
Finally, China’s insistence on Covid zero policy and more lockdowns, coupled with global inflationary pressures, have tired banks of more lending. Despite the measures taken by the government, the current decline in real estate values, which is the first in more than 10 years, is expected to continue in the near future.
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