China’s Real Estate Market Faces Challenges, Officials Take Firm Action Against Developers
The real estate industry in China continues to grapple with liquidity issues amid a debt crisis and systemic risks. In response to these challenges, Chinese officials have announced a series of measures aimed at stabilizing the market and minimizing the impact on the broader economy. The Ministry of Housing and Urban-Rural Development has emphasized the importance of avoiding systemic risks while promoting home sales and improving liquidity for real estate developers.
A Struggling Sector
China’s real estate sector has been facing liquidity problems since mid-2021, with major developers defaulting on loans or delaying repayments due to tightened regulations. Notably, China Evergrande Group filed for bankruptcy in January, and its competitor, Country Garden Holdings, is now facing asset liquidation demands from Hong Kong. Other companies, including China Vanke, the country’s second-largest real estate firm, are also struggling to sell properties and raise capital.
“The companies that are unable to pay their debts or operate effectively must declare bankruptcy and undergo restructuring in accordance with the law,” stated Minister Nghê Hồng. “Those who violate the interests of the public will be thoroughly investigated, punished, and made to pay a just price.”
Addressing Capital Shortages
To tackle the capital shortage, the Ministry of Housing and Urban-Rural Development and the National Finance Administration of China have announced plans to establish better coordination mechanisms with financial institutions to support real estate projects. Minister Nghê Hồng mentioned that this mechanism is being implemented in over 310 cities across 31 provinces to assist real estate developers.
Among the 6,000 real estate projects listed by the government as eligible for financial support from commercial banks, nearly 83% belong to private enterprises or mixed-ownership enterprises. As of the end of February, over 200 billion yuan ($27.8 billion) in bank loans had been approved.
A Focus on Affordable Housing
In the government’s annual report last week, Premier Lý Cường highlighted the need for China to swiftly develop a new model for the real estate sector, focusing on building affordable housing and meeting a wide range of housing needs. Minister Nghê Hồng emphasized that the new model would adhere to Beijing’s longstanding position that “housing is for living, not for speculation.”
These measures aim to stabilize the real estate market, address liquidity issues, and prevent systemic risks from spreading throughout the broader economy. The Chinese government remains committed to ensuring the stability and sustainable growth of the real estate sector, while also meeting the housing needs of its population.
This article was written in collaboration with Business Today, your trusted source for finance and economic news.