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Chinese lenders to pump $162bn of credit into property developers

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China’s largest lender is poised to extend more than $162 billion in credit to the country’s property developers as the Xi Jinping government pulls out of tight controls on leverage in the property sector that sparked the property crisis.

The Industrial and Commercial Bank of China (ICBC), China’s largest lender by assets, announced Thursday that it will extend credit lines totaling 655 billion yuan ($92 billion) to 12 developers. Other state-owned banks, including China Post Bank, this week We also launched new lending to the heavily indebted sector.

Lending is a key moment for China’s property sector, which drives more than a quarter of economic output. many of its companions.

“This move is unprecedented,” said Yan Yuejin, research director of the E-house China Research and Development Institute in Shanghai. Yang said the rare disclosure of loan details by Chinese commercial banks showed the authorities wanted to boost confidence.

“While the supportive tone for the real estate sector is consistent with other measures deployed this year, the key pivot this time is in the direction of strong support for quality developers.”

A cash shortage last September at Evergrande, which has about $300 billion in debt, triggered a widespread slowdown as land and property sales plummeted nationwide. Industry-wide indicators continued to decline last month.

The new government line of credit is primarily aimed at developers who are considered stable and have avoided the worst of the crisis. Among them are Vanke, Gemdale, Greenland Holdings and Country Garden, China’s largest by sales.

Beijing has so far refrained from injecting large amounts of new capital into its property sector, instead focusing on completing thousands of housing projects that have been severely disrupted by the crisis.

ICBC said its financing would support “project development” and “merger and acquisition deals”, with the funds being used to consolidate assets still remaining on the balance sheets of struggling developers elsewhere. It suggests that there is a possibility that

The state bank loan follows last week’s aid package, widely interpreted as a turning point for the sector. A 16-point property rescue plan, which eases deadlines for bank debt maturities and bond issuances, was officially unveiled by the central bank on Wednesday.

CICC’s Zhang Yu and Li Hao said:

“In 2023, national home sales could grow by 2% year-on-year, but real estate investment is likely to recover at a slower pace than sales and remain flat or decline slightly year-on-year.

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