After the central bank of China unveiled measures to enhance the liquidity available to property developers, the country’s real estate stocks experienced a significant increase. The objective of the move is to alleviate the persistent cash shortage that Chinese developers have been facing due to Beijing’s efforts to address the sector’s excessive debt levels. The CSI property index surged by 5.2%, while the broader CSI 300 in mainland China saw a rise of 1.8%. Hong Kong-listed Country Garden’s shares climbed 2.94%, Logan Group jumped 5.17%, and Longfor Group added 4.61%. Furthermore, Hong Kong’s Hang Seng Mainland Properties index soared by as much as 3.9%. The People’s Bank of China and the Ministry of Finance jointly announced that the new measures will remain in effect until the conclusion of 2024. According to the statement, banks are now permitted to issue loans to commercial real estate firms “with good comprehensive benefits that have passed the completion inspection and acceptance, obtained the real estate ownership certificate, and been put into operation, with the operating property as collateral.” Addressing China’s property crisis is expected to be a prolonged endeavor, with Oxford Economics estimating that it will take at least four to six years for real estate developers in the country to finish incomplete residential properties. Despite the deepening slump in the property sector, China’s economy, the world’s second largest, expanded by 5.2% last year, meeting Beijing’s target. China’s property developers are grappling with significant debt issues, and some of the largest players have initiated bankruptcy proceedings. The challenges faced by China’s real estate market have significant implications for local government finances, as they historically relied on land sales to developers for a substantial portion of their revenue. These concerns have heightened financial risks and dampened consumer confidence, while consumer prices hover near deflation. —Contributions to this report by CNBC’s Clement Tan and Evelyn Cheng.
