2024-01-31 14:47:39
Beijing unveils new measures to support real estate amid fears of repercussions from “Evergrande”
Chinese official media reported that a state-backed real estate project obtained the first development loan under the so-called “white list” mechanism in Beijing, and that two major cities eased restrictions on purchasing homes, at a time when concerns are growing regarding the liquidation of “Evergrande.”
The latest measures are in addition to a series of supportive policies introduced by the world’s second largest economy over the past year to help revive the economically important real estate sector, which was affected by an unprecedented debt crisis.
Despite these measures, the real estate market ended last year with the worst decline in new home prices in nearly nine years, casting a cloud on hopes for a broader economic recovery and renewing investor demands for stronger policy initiatives.
Analysts say a Hong Kong court’s decision to place real estate giant China Evergrande Group under liquidation might worsen demand expectations, as homebuyers take a cautious approach given uncertainty regarding the health of other private developers.
State media reported on Tuesday that two major cities in China, Suzhou and Shanghai, followed Guangzhou’s example in easing restrictions on home purchases, in an attempt to boost demand from home buyers.
However, investors were not enthusiastic regarding the new support, with the Hang Seng Property Index in mainland Hong Kong and the CSI300 Property Index in China falling 2.6 percent on Wednesday.
In another support measure, a 330 million yuan ($46 million) loan was approved for a state-backed development project just days following the government announced the “project whitelist” mechanism, the official Securities Times reported on Wednesday.
The newspaper said that the city of Nanning in the Guangxi region presented the first “project white list” to local financial companies, containing 107 development projects, and a state-backed project received a development loan.
The report added that the southwestern city of Chongqing has also drawn up a whitelist of 314 projects, with a total of 83 billion yuan in requested funding.
The launch of financing support under this mechanism is being closely watched by the market, which has been suffering from a debt crisis since mid-2021 that has led to thousands of unfinished homes and defaults, especially among privately owned developers.
The new measures come as analysts study the impact of a court order to put Evergrande, once the best-selling developer in China, under liquidation with liabilities exceeding $300 billion.
“We believe that home buyers’ concerns are focused on purchasing pre-sold units from financially distressed developers who may not deliver the project on time, and this is the main reason why home sales continue to slow,” said Christopher Beador, deputy director of research at Gaveical Economics. “If nothing else, the news of the required liquidation in Hong Kong will not have a significant impact on home buyer sentiment.”
In a separate matter, three informed sources told Reuters that major state-owned banks were selling dollars heavily on Wednesday, which led to the stability of the yuan while it was exposed to pressure in currency trade at a time when the economy was still fragile.
State banks often act on behalf of China’s central bank in the foreign exchange market, but can also trade on its own behalf or execute client orders.
One of the people said the selling was “very aggressive” to defend the yuan at around 7.1820 to the dollar in the onshore spot market. All sources spoke on condition of anonymity because they were not permitted to discuss market conditions publicly.
The government banks’ actions come at a time when the yuan is facing renewed downward pressure from foreigners’ rush to exit sinking Chinese stock markets and the global recovery of the US dollar.
With a 1 percent decline, the yuan is headed for its largest monthly decline once morest the dollar in five months, and the blue-chip CSI300 index posted a record loss for the sixth month in a row on Wednesday.
Investors are pessimistic regarding China’s growth prospects, frustrated by the lack of a large-scale rescue of the beleaguered real estate sector, and exhausted by several years of poor performance.
In conjunction with real estate sector concerns, an economic report published on Wednesday showed continued weakness in China’s manufacturing sector confidence during the month of January.
According to China’s National Bureau of Statistics, the purchasing managers’ index for Chinese manufacturing enterprises in January rose to 49.2 points, an increase of 0.2 percentage points from the previous month.
Despite the improvement in the index, it is still below the level of 50 points, as an index reading of less than 50 points indicates a contraction in the economic activity of the sector, and more than 50 points indicates growth in activity.
According to the data, the Purchasing Managers’ Index rose to 50.2 points in September last year. Since last October, he has been declining steadily until he scored 49 points last December.
Meanwhile, China’s services sector PMI rose to 50.7 points in January, compared to 50.4 points last month. It is noteworthy that weak domestic consumption, the severe crisis in the real estate sector, and weak foreign trade are negatively affecting the manufacturing sector, which represents the locomotive of the Chinese economy.
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