(Yicai Global) Nov. 14 -- The sixteen measures issued by China’s financial regulators will help the real estate market and are expected to enable a soft landing for the troubled sector, in turn benefiting the country’s economic and financial stability.
This has been the strongest set of policies with the most specific measures since China began marginal adjustments to housing policies in September last year. First, the new policies support a wide range of targets, covering fund-raising on both the demand side (buyers) and supply side (developers and construction firms)
Second, these policies involve enriched channels for financing, such as real estate development loans, trust loans and fundraising via bonds. And third, there is an abundance of policy tools, including the reasonable rollover of existing loans, support for issuance of bonds by real estate developers through the increase of credit, and encouragement for financial institutions to issue special bonds for mergers and acquisitions of property projects.
The policy document also illustrated the detailed measures that will guarantee the delivery of commercial housing. Regarding loans previously provided only by policy lenders, the new policies also encourage financial institutions to offer corresponding support to help “guarantee the delivery of properties,” and mitigate risks from unfinished real estate projects.
Following the release of these policies, the financing needs of developers will be more stable and risk disposal for those firms facing difficulties will be accelerated. This will stabilize their operations and avoid the risk of economic growth being held back by a sluggish real estate market.
From the perspective of consumers, this policy document will improve their expectations and steady their confidence in the housing market. With the gradual recovery of the economy next year, the structure of households’ assets and liabilities will be optimized.
From the point of view of financial organizations, allowing a rational rollover of loans will avoid a serious rise in the amount of non-performing loans in the short run, which will stabilize financial institutions’ operations and block the risk of real estate turbulence spilling over into the financial system.
The policies also show new directions for the development of the real estate sector including rental housing. Currently, the rental market in China is not stable or profitable enough, prompting local governments, financial institutions and developers to jointly push for reform in future.
(The author is professor of economics and finance at China Europe International Business School and former head of the financial survey and statistics department at the People’s Bank of China.)
Editors: Dou Shicong, Tom Litting