China’s bank and property stocks rose after regulators sought to defuse a growing consumer boycott of mortgage payments by urging banks to increase lending to developers so they can complete unfinished housing projects.
The guidance from the China Banking and Insurance Regulatory Commission was issued in response to the boycotts and is aimed at expediting the delivery of homes to buyers, a newspaper published by the watchdog reported on Sunday, citing an unidentified senior official at the agency.
China is looking to stem the protests that have flared up at 100 housing projects across 50 cities, threatening to spread the real-estate crisis to the banking system.
Regulators met with banks last week to discuss the boycotts, while state media have cited analysts warning that the stability of the financial system could be hurt if more home buyers follow suit.
“The core issue here is for the government to step in quickly to boost confidence, to solve the problem at hand, and also provide more clarity to the market and investors on how this downturn in the property sector is going to be resolved,” Goldman Sachs Group Inc chief China economist Hui Shan (閃輝) said in an interview on Bloomberg Televison.
Bank stocks rallied on the report, as the CSI 300 Bank Index jumped 1.4 percent, the first gain in nine sessions. Shares of Chinese lenders dipped 7.7 percent last week, the biggest decline in more than four years. A gauge of property shares rose 2.9 percent yesterday.
The boycotts over project delays also pose a risk to the broader housing market by keeping potential home buyers on the sidelines. The market had seen signs of stabilizing in recent months, with some analysts calling for a turnaround in the second half of this year.
Output in the real-estate industry, a key economic contributor, contracted 7 percent in the second quarter from a year earlier, the Chinese National Bureau of Statistics said on Saturday.
It remained the biggest drag on the world’s second-largest economy among all sectors, and performed worse than the first quarter of this year.
According to the weekend report, the commission is to strengthen its coordination and cooperation with the Chinese Ministry of Housing and Urban Development, and the central bank to support local governments to help ensure housing project delivery, the official was cited as saying.
“While following market principles and the rule of law, [banks] should also actively assume social responsibility, and do whatever possible to ensure home deliveries,” the official said.
In separate comments over the weekend, China’s central bank said it would step up the implementation of its prudent monetary policy to provide stronger economic support.
The economy is facing “certain downward pressures” due to the COVID-19 pandemic and external factors even as domestic inflation is relatively low, central bank Governor Yi Gang (易綱) told a meeting of G20 central bank governors and finance ministers.
The China Banking and Insurance News on Sunday reported that regulators had urged banks to support mergers and acquisitions by developers to help stabilize the real-estate market.
Banks were also asked to improve communications with home buyers and to protect their legal rights, the report said.
China’s commercial banks that have disclosed their overdue loans on unfinished homes have so far detailed more than 2.11 billion yuan (US$312 million) of credit at risk. GF Securities Co (廣發證券) expects that as much as 2 trillion yuan of mortgages could be affected by the boycott.
While the lenders have called the situation controllable, concerns have persisted given the importance of the sector.
The real-estate industry, when including construction, sales and related services, accounts for about one-fifth of China’s GDP. An estimated 70 percent of the country’s middle-class wealth is also tied up in property.
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