Banks may resist China’s push to help developers

Seazen

21/11/2023 02:50

(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
       SINGAPORE, Nov 21 (Reuters Breakingviews) - Beijing is
giving Chinese banks another nudge to persuade them to play the
property white knight. Regulators including the People’s Bank of
China are drafting a “whitelist” of 50 property developers,
including state-backed China Vanke  000002.SZ  and fully private
ones like Seazen  1030.HK  and Longfor  0960.HK ,
Bloomberg reported citing unnamed sources. The move seems aimed
at giving financial institutions more confidence in lending to
the struggling sector. It’s unclear whether more distressed
players like Country Garden  2007.HK  would be included. More
importantly, barring specific lending targets, banks are likely
to remain in wait-and-see mode because they fear getting stuck
with a mountain of bad loans.
    A 50-name-long whitelist would be the widest net cast by
policymakers so far, reflecting the intense pressure to prevent
a rout as housing sales continue to slump. Such unofficial lists
have been widely circulated before without great success. Last
December, Chinese banks pledged new credit lines worth around 3
trillion yuan ($424 billion) to a dozen developers deemed worth
saving, following a similar effort by Beijing. It didn’t prevent
the then white-listed Country Garden and others from slipping
into restructuring this year. 
    The draft also follows a Friday meeting where regulators
asked banks to ensure that loan issuance to private builders
“grows at the same rate as the industry average”, according to
Bloomberg. But at a time when China’s outstanding property loans
are contracting, such vaguely worded guidance loses relevance.
The drip-drip of support is better than nothing. But the risk is
that few play along. (By Yawen Chen)  

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 (Editing by Francesco Guerrera and Thomas Shum)