China’s real estate industry is in distress, prompting the Chinese Communist authorities to roll out a series of measures in an attempt to salvage the situation. Particularly at the beginning of this year, the Chinese government introduced the so-called “white list,” designating certain residential real estate development projects to receive special financing. However, banks, wary of the risks of non-performing loans, have been reluctant to lend, further undermining confidence in the Chinese real estate market.
According to a report by Reuters on Tuesday, based on a company statement, input from executives of two developers, and insights from two others familiar with the program, only six developers’ projects on the “white list” have obtained new loan approvals from banks since late March. Due to the private nature of the transactions and sensitive issues involved, the sources requested anonymity.
Three insiders disclosed that these new loans have only been disbursed to a few select projects, with each project receiving loans equivalent to just tens of thousands of US dollars so far.
The real estate industry in China appears to be caught in a downward spiral.
Lawrence Lu, Managing Director of S&P Global, stated that the current sluggish real estate market conditions are the primary hindrance to increasing new bank lending.
Lu was quoted by Reuters saying, “Developers need projects to get funding…the problem now is whether the projects can generate enough cash flow to repay debts.”
The “white list” scheme requires local governments to identify failed real estate development projects within their jurisdiction as candidates for special loans from Chinese state-owned banks. Subsequently, banks review this list and disburse funds to approved projects.
Chinese media reports indicated that the initial round of loans totaled approximately 123.6 billion Chinese yuan (about 17.2 billion US dollars), allocated to 162 projects in 57 cities, including projects related to struggling private real estate developers like Country Garden, Sunac, and CIFI.
Since 2021, Chinese real estate developers have been collapsing one after another, continuously exacerbating China’s already weak economy.
Three sources mentioned that loan disbursements are solely based on construction progress, further noting that given the massive number of unfinished housing units, the approval volume for loans is “insignificant.”
A report by Reuters in March estimated that projects covered under the “white list” scheme require new financing worth 1.5 trillion Chinese yuan (approximately 207.51 billion US dollars), which is merely a drop in the bucket compared to the massive debt burden faced by the Chinese real estate sector.
Renowned Epoch Times columnist Milton Ezrati previously noted that if the Chinese Communist Party’s “white list” plan is considered a step in the right direction towards problem-solving, it remains far from addressing the financial challenges looming over China. Even if the scale were to expand two, three, or fourfold, this approach would still leave hundreds of billions in problematic debt enveloping China’s financial system.