China raises loan-support efforts for developers amid mortgage boycott

Asks banks to meet financing needs; officials consider temporary waivers

Chinese regulators stepped up efforts to encourage lenders to extend loans to qualified real estate projects as the beleaguered property sector faced fresh risks from a widening mortgage-payment boycott on unfinished houses.

The China Banking and Insurance Regulatory Commission (CBIRC) told the official industry newspaper on Sunday that banks should meet developers’ financing needs where reasonable.

The CBIRC expressed confidence that with concerted efforts, “all the difficulties and problems will be properly solved,” the China Banking and Insurance News reported.

The remarks come as a growing number of homebuyers across China threatened to stop making their mortgage payments for stalled property projects, aggravating a real estate crisis that has already hit the economy.

The latest news helped banking and property stocks recover some of their recent losses. China’s banking index, which tumbled 7 per cent to a more than two-year low last week, bounced 1.4 per cent on Monday. Chinese real estate stocks gained 3.1 per cent on the mainland, and jumped 3.7 per cent in Hong Kong.

The rebound in Chinese banking stocks was also aided by news that China will accelerate the issuance of special local government bonds to help supplement the capital of small banks, part of efforts to reduce risks in the sector.

China may also allow homeowners to temporarily halt mortgage payments on stalled property projects without incurring penalties, Bloomberg reported after the market close on Monday, citing people familiar with the matter.

The report added that homeowner eligibility and the length of grace periods would be decided by local governments and banks, and the yet-to-be-finalised proposal from financial regulators would require approval from senior Chinese leaders.

Investors have already welcomed early signs of government intervention. Shares of developers jumped on Monday, recouping some of their steep losses from last week, after a report in a newspaper published by the CBIRC that regulators urged banks to increase lending to developers so they can complete unfinished housing projects. The rally also extended to shares of banks, even though they potentially face a hit to profits by offering relief to homeowners and extending fresh loans to troubled property projects.

Regulators have also asked China Construction Bank Corp., the nation’s largest mortgage lender, to explore a pilot program to set up a fund with selected local governments to purchase projects under construction that have yet to find buyers.