Exclusive – China’s central bank will offer cheap loans to support developers’ bond sources


by Julie Zhu and Engen Tham

HONG KONG/SHANGHAI (Reuters) – China’s central bank will offer cheap loans to financial firms to buy bonds issued by property developers, four people with direct knowledge of the matter said, the strongest policy support yet for the beleaguered sector. .

The People’s Bank of China (PBOC) hopes the loan will boost market sentiment towards the heavily indebted real estate sector, which has been reeling from the crisis over the past year, and can save many private developers, the people said . Said, who asked not to be named as he was not authorized to speak to the media.

In recent weeks, China has stepped up support for the real estate sector, which accounts for a quarter of the world’s second-largest economy. Many developers failed to meet their loan obligations and had to stop construction.

The nation’s largest banks pledged at least $162 billion in credit to developers this week.

The PBOC loan is expected to be much lower than the benchmark rate and will run in the coming weeks, giving financial institutions more incentive to invest in onshore bonds from private developers, two sources said. Will get.

Terms such as the interest on the loan were not immediately known.

Two sources said the PBOC is also preparing a “white list” of high-quality and systemically important developers, who would receive broad support from Beijing.

The central bank did not immediately respond to a request for comment on the planned measures.

At least three private developers, including Longfour Group Holdings Ltd., Midea Real Estate Holding Ltd. and Season Holdings Ltd., were given the green light this month to raise loans totaling 50 billion yuan ($7 billion). One of the four people and another source said that if there was not enough investor demand for such new bonds, the PBOC would take steps to provide liquidity through a credit facility for the remaining issue.

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From crackdown to aggressive support

Redistribution is a targeted policy tool typically used by the PBOC to provide cheap loans to banks to support a slowing economy, as the central bank has limited room to cut interest rates due to concerns about capital flight. confronts.

PBOC has used the credit facility in recent months to support industries including transportation, logistics and technology innovation that were hard hit by the COVID-19 pandemic or favored by longstanding government policies.

Beijing’s aggressive support for the real estate sector contrasts with the crackdown on speculators and indebted developers from 2020 to reduce financial risks.

As a result of the action, property sales and prices plummeted, developers defaulted on bonds and construction halted. The freeze has angered homeowners who have threatened to cut off mortgage payments.

Two sources said the PBOC plans to provide 100 billion yuan ($14 billion) in M&A financing facilities to state-owned asset managers to acquire real estate projects, mainly from troubled developers.

Chinese media reported on Monday that the central bank plans to provide 200 billion yuan in interest-free loans to commercial banks by the end of March to complete housing construction.

Among other recent official support, China’s interbank bond market regulator said this month it would expand a program to support loan proposals from private companies to the tune of about 250 billion yuan ($35 billion).

Much of Beijing’s past support has focused on state-owned developers.

Yi Huiman, chairman of China’s securities regulator, said Monday the country should implement plans to improve the balance sheets of “good quality” developers.

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Fitch Ratings said on Thursday private Chinese developers face higher liquidity risk in terms of debt structure with greater short-term pressures than other state-owned companies as banks and other creditors are reluctant to lend. to go

($1 = 7.1609 Chinese Yuan Renminbi)

(Reporting by Julie Zhu in Hong Kong and Eng Tham in Shanghai; Additional reporting by Kevin Huang in Beijing; Editing by Sumeet Chatterjee and William Mallard)




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