(Aug 14): China is preparing to mobilise companies owned by the central government in Beijing to purchase unsold homes from distressed property developers, following the limited success of a previous initiative that relied on local governments, according to people familiar with the matter.
Regulators are planning to ask some of the biggest state-owned enterprises and bad debt managers including China Cinda Asset Management Co to help clear the housing glut, said the people, asking not to be identified discussing a private matter. The firms will be allowed to tap 300 billion yuan (US$41.8 billion or RM175.5 billion) of funding that the central bank earmarked for the programme last year, one of the people said.
The renewed effort, which is still under discussion, could help speed up the clearance of China’s 408 million square meters of excess inventory — larger than the size of Detroit — and ease the financial burden of the troubled developers. Officials are also considering scrapping a price cap for the programme, in a bid to accelerate the process and improve the economics of the plan for both developers and state buyers, people familiar said in March.
The housing ministry and Cinda didn’t immediately respond to requests for comment.
While the move to enlist bad-debt managers might help improve sentiment, the impact may be limited by the firms’ own stretched finances. The plan comes as China’s property sector hits a new low with the delisting of China Evergrande Group and new-home sales by the 100 largest developers falling more than 20% for two consecutive months.
The People’s Bank of China launched a nationwide relending programme in May 2024 to help local state-owned companies buy unsold homes, and said a few months later it will ramp up the initiative. There are about 60 million unsold apartments in the country, which will take more than four years to sell without government aid, Bloomberg Economics estimated in May last year.
However, progress has been slow with less than 6% of the announced loans approved so far, according to a Bloomberg Intelligence report early this month. Acceleration of the programme might be unlikely given a mismatch in the locations of unsold homes and demand for affordable housing, the report said.
When China’s property sector started falling into distress more than four years ago, Beijing sought help from bad-debt managers. Regulators told firms including Huarong Asset Management Co and Cinda to participate in the restructuring of weak developers, acquire stalled property projects and buy soured loans.
Then, in early 2023, the PBOC channelled 80 billion yuan of loans through these bad banks to selected developers at an annual interest rate of 1.75%, while encouraging the bad banks to match that amount with funds from their own reserves, people said at the time.
However, few projects have actually been implemented under the policy, and its effect has been lacklustre. The four largest bad-debt managers themselves were grappling with souring loans after over-extending during China’s real estate boom.
China’s efforts to put a floor under the years-long real estate slump have underwhelmed as domestic demand and the job market remain weak.
Regulators have also yet to offer more drastic stimulus. Chinese President Xi Jinping called for the acceleration of a “new model” for property development at the Central Urban Work Conference last month, promoting a more balanced approach to urban planning and renovation — while falling short of some investors’ expectations for more aggressive measures.
The country’s home sales extended their slump in July as declining prices failed to attract buyers. Analysts including those from UBS Group AG have delayed expectations of China’s property recovery to mid-to-late 2026.
Uploaded by Magessan Varatharaja
