Chinese Banks Matched with Over 8,200 Projects for Development Loans Under "Whitelist" Mechanism
In an effort to stabilize the debt crisis in China's property sector, five state-owned Chinese banks have been matched with more than 8,200 residential projects for development loans under the "whitelist" mechanism, according to a report by The Paper. This mechanism, which is part of Beijing's ongoing efforts to address the debt crisis that has significant implications for China's GDP, allows city governments to recommend residential projects suitable for financial support, streamlining coordination with banks.
The Postal Savings Bank of China has already approved loans to address the financing needs of 5.7 billion yuan. However, specific details regarding the number of projects approved have not been provided.
The Industrial and Commercial Bank of China, Agricultural Bank of China, and China Construction Bank have each received over 2,000 applications. As of a certain date, the Bank of Communications had 1,442 projects, while the Bank of China has approved 75 projects involving nearly 40 billion yuan after reviewing more than 110 applications.
According to estimates by CGS International, the 8,000 projects in question have a combined financing need of 3.2 trillion yuan, with a third of it possibly being secured through new loans. Following the report, the Mainland Properties Index experienced a significant increase, particularly in the shares of defaulted companies such as Shimao Group, KWG Group, and Kaisa Group. Several distressed developers have also had their projects approved for the whitelist by local governments.
While the aim of this policy is to boost financing specifically for residential projects, concerns have been raised regarding the banks' willingness to lend to this sector. It is important to note that these loans are intended solely for the completion of the selected projects and cannot be used for debt repayment or financial recovery.
Analyst comment
Positive news: The Chinese government’s “whitelist” mechanism for development loans in the property sector is expected to stabilize the debt crisis and boost China’s GDP. Chinese banks have received thousands of applications for financing residential projects, leading to a significant increase in the Mainland Properties Index. Distressed developers have also had their projects approved under the whitelist. However, there is concern over banks’ willingness to lend to the sector, as loans are intended only for project completion and not for debt repayment or financial recovery.
