China bad-debt firms plan property support of up to $31.4 billion

BEIJING – Chinese financial regulators and the nation’s biggest bad-debt management companies plan to offer as much as 160 billion yuan (S$31.4 billion) of refinancing support to high-quality developers in the first quarter, according to people familiar with the matter.

Under the plan first announced on Friday with little details, the People’s Bank of China (PBOC) will channel 80 billion yuan of loans through China Huarong Asset Management and its peers to selected developers at an annual rate of 1.75 per cent, the people said. The firms with the distressed debt are encouraged to match the amount from their own coffers, the people added.

The PBOC, China Huarong and China Cinda Asset Management did not immediately reply to requests for comment.

The loans add to a clutch of measures issued since November to arrest the

slump in China’s property market.

Regulators are ramping up financial support to systemically important developers, while lowering mortgage rates and down payment requirements to boost demand.

Yet those measures are being stifled by large-scale coronavirus outbreaks after the

government suddenly abandoned its zero-Covid policy.

Confidence among businesses and consumers has yet to recover to pre-pandemic levels. New home prices in 70 Chinese cities fell for a 16th month in December, official figures showed on Monday.

Instead of issuing a full-on bailout, the government is now offering support to the stronger companies in the real estate market. The Financial Stability and Development Committee told banking and securities regulators to shore up the balance sheets of systemically important developers that have no auditing issues and no records of major violations, people familiar with the matter said earlier this month.

By taking on the saviour role with state funding, the asset management companies could ease the woes of a sector they have heavy exposure to. Aggressive lending to embattled developers during the industry’s boom years has beset the US$730 billion (S$963.4 billion) bad-debt managers with heavy credit losses, sending their bonds tumbling and forcing Beijing to weigh a preliminary plan to restructure the sector, sources said in August.

The four big managers – China Huarong, China Cinda, China Great Wall Asset Management and China Orient Asset Management – have lent money to the majority of the country’s top 50 developers over the years. China Cinda and China Huarong alone had more than 200 billion yuan in exposure, and property accounted for nearly 50 per cent of their acquisition and restructuring businesses as at the end of June, according to their filings. BLOOMBERG