China’s central bank has announced a plan to provide 300 billion yuan ($41.6 billion) in low-interest loans to financial institutions, enabling these institutions to lend to local state-owned enterprises (SOEs). The objective is for SOEs to purchase built but unsold apartments, which they can then resell or lease as affordable housing [para. 1]. This initiative is part of China’s broader strategy to support its struggling property market. Other measures recently introduced include the removal of the nationwide minimum mortgage interest rate and a reduction in the minimum down-payment ratio required for home purchases [para. 2].
The loans offered will have a one-year term with an interest rate of 1.75%, and these loans can be renewed up to four times. A total of 21 banks, encompassing state-owned commercial banks, joint-stock banks, and policy banks, are eligible for this program. The People’s Bank of China (PBOC) anticipates that this initiative will release up to 500 billion yuan in financing to SOEs [para. 3]. This policy mirrors the operational framework of PBOC’s other structural monetary tools, allowing financial institutions the autonomy to decide whether to grant loans to SOEs and determine loan terms themselves [para. 4].
It is stipulated that the housing acquired under this relending program must strictly consist of unsold, completed properties from real estate enterprises of all ownership types and must adhere to predefined area standards conducive to affordable housing [para. 5]. The SOEs involved must not have hidden debts linked to local governments and are prohibited from acting as local government financing platforms. Local governments have the discretion to decide their level of participation in this program based on their specific property market conditions [para. 6]. The PBOC highlights that developers can use the funds obtained by selling unsold properties to SOEs to complete other pending construction projects [para. 7].
Further, various cities have been experimenting with methodologies to purchase unsold homes for affordable rental housing or buy pre-owned homes from existing homeowners looking to upgrade [para. 8]. For example, in Zhengzhou, Henan province, and Zhangzhou, Fujian province, state-owned enterprises have launched such initiatives. Specifically, the Zhengzhou city government has tasked the state-owned Zhengzhou Urban Development Group Co. Ltd. with the mission of purchasing 5,000 old housing units and assisting homeowners in buying new properties [para. 9].
For additional information, contact reporter Denise Jia via email at huijuanjia@caixin.com [para. 10].
AI generated, for reference only
