Chinese lenders step up credit support for property market

BEIJING - China's six major state-owned commercial banks have signed agreements with high-quality real-estate enterprises, aiming to facilitate the stable and healthy development of the real-estate market.

The six banks announced the provision of credit support amounting to more than 1 trillion yuan ($140.2 billion), mainly for real-estate development, mortgages to consumers, mergers and acquisitions, supply chain financing and bond investments.

The six commercial banks are the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China.

The move comes after a 16-step guideline issued by the People's Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) on Wednesday, which encouraged commercial banks to grant loans for the acquisition of real-estate projects in a prudent and orderly manner.

Support will also be given to two policy banks on issuing specific loans to qualified borrowers to ensure the delivery of housing projects, the guideline noted.

Previously, the PBOC issued 200 billion yuan worth of special loans to ensure the timely completion of pre-sold housing projects and put in place structural policy tools to encourage active participation by commercial banks.

From January to October, China's banking sector lent 2.64 trillion yuan to property developers, according to the CBIRC.

"The government's recent actions to step up support for developers' funding could improve the companies' financial flexibility and partly temper their near-term refinancing pressures," said Kelly Chen, a Moody's vice president and senior analyst.

The PBOC and the CBIRC said at a work conference on credit business on Monday that private developers are supported in raising funds through bond issuance.

Last week, Chinese authorities released a circular to allow qualified property developers to withdraw pre-sale funds. After being assessed, developers that meet standards regarding credit risks, financial conditions and reputation will be eligible to receive the letters of guarantee.

Economist Ren Zeping said in a research report that the recent support package could be interpreted as a policy turning point for the real-estate market. He however pointed out that the confidence of residents and their ability to purchase houses are yet to be restored in the short-term.

On the demand side, mortgage rate cuts, tax relief and other measures rolled out in favor of home buyers are spurring demand and stabilizing property market expectations.

In the 16-step guideline, Chinese authorities encourage financial institutions to set reasonable down payment ratios and interest rates to bolster demand for mortgages.

China recently allowed commercial banks to reduce the floor of interest rates on home loans by 20 basis points for first-home buyers. The loan interest rates of the housing provident funds for these buyers have also been cut, dropping 0.15 percentage points.

In addition to mortgage rate cuts, China announced in late September that it would refund personal income taxes collected from any homeowner who is selling their current house to buy a new one. The relief measure, which is in place from October to the end of next year, can save eligible residents 30,000 to 50,000 yuan in most cities.

Upholding the stance of "housing is for living in, not for speculation," China will continue to support people's essential housing needs, as well as their needs for better housing.