Chinese banks help developers by issuing loans
2022.12.02 04:52
Chinese banks help developers by issuing loans
Budrigannews.com – Three people who know the situation told Reuters that China has been instructed by four leading state-owned banks to issue loans offshore to help developers repay foreign debts.
This is the latest move by Beijing to support the real estate sector, which is suffering from a shortage of money.
Two sources, speaking on anonymous terms, stated that the regulatory authorities gave banks “guidelines on the window”, or verbal orders that did not leave paper traces, and gave them time during December 10 to issue loans secured by internal assets.
In the past few weeks, China has stepped up support to mitigate the crisis that has decimated the sector, which occupies a quarter of the world’s second-largest economy, and is the main driver of economic growth in the world.
Last year, more and more developers refused to fulfill their obligations to a foreign lender. In this regard, several analysts expressed concern that such failures could reduce the desire of a foreign investor to issue new debt obligations to Chinese enterprises.
Refinitiv believes that developers are experiencing a problem with the repayment of $ 39 billion in debt, which should be repaid in the first half of this year, including $ 10 billion in dollars. Two sources reported that the developments will be able to repay offshore debts and dollar bonds at the expense of banks, as well as restore the shattered investor confidence on a global scale.
One of the sources stated that developers such as CITI Holdings (CIFI Group), Country Garden (Lonfor Group), Mideareal Estate (Sazen Group) may receive the right to recognize their balance sheets as “good quality” if their balance sheets are recognized as “good quality”. According to three sources, each of the four banks, Chinese Construction Bank OTC:, Chinese Agro-Industrial Bank OTC: and Chinese Industrial Bank OTC: will select a number of investors who will finance the construction. According to two sources, each bank accepts from 3 to 4 offshore loan offers secured by assets of Chinese developers.
Later, Beijing will add banks to the scheme. According to a third source, the Big Four banks would prefer loans to developers supported by the state, but they had to include several private enterprises in need of more offshore lending.
In response to Reuters’ requests for clarification, the People’s Bank of China, the Central Bank or the Commission for the Regulation of Banking Activities in China, the Central Bank of China did not receive any response, and the People’s Bank of China, the Central Bank or the Commission for the Regulation of Banking Activities in China.
Representatives of CIFI, Land Garden, LongFor, Midee Real Estate, Seazen also did not respond to requests for comment.
Beijing’s aggressive real estate assistance is a departure from the crisis that began in 2020 to reduce financial risks by targeting speculators as well as developers burdened with debts.
Companies with foreign capital can get an offshore loan secured by domestic assets from Chinese banks, but this type of lending has recently hindered tighter regulation aimed at reducing the debt of corporate organizations.
While the demand for housing has declined sharply due to the severe and prolonged restriction of SARS, developers have been trying to get access to fresh sources of financing to complete the construction of housing and pay off suppliers and global debts.
The rating agency Moody’s NYSE said that the slowdown in economic growth and the continued slowdown in the real estate sector leads to the vulnerability of small banks. Last week, the largest Chinese banks promised investors a loan of $ 162 billion.
After recent support efforts, some foreign bondholders have to look for lucrative real estate offers, so a new move is underway while others find themselves away from the uncertain prospect of real estate demand.
