December 9, 2022

Market and Financial News

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China Is Finally Trying to Fix Its Housing Crisis

2 min read

More than a year after one of China’s biggest real estate developers began to collapse, trouble has rippled through cities across the country. Dozens of other developers have also missed debt payments, the sale of new homes has plunged and construction cranes have come to a standstill at many sites.

This week the Chinese government, which until now has stayed largely on the sidelines of the country’s housing crash, has taken its most forceful steps so far to try to minimize the damage from the turmoil that has enveloped China Evergrande Group, the world’s most heavily indebted developer, and many of its competitors.

Real estate development plays an outsize role in China’s economy, representing about a quarter of economic output and a quarter of its bank loans. Housing represents at least three-fifths of household assets in China, and many Chinese regard apartments as the only reliable way to build wealth.

This week’s intervention by the government took on greater urgency as Covid-19 cases hit record levels. The infections have prompted a new wave of strict lockdowns that are disrupting factories and other businesses, cutting into spending by consumers, and preventing home buyers from visiting apartment complex showrooms. This has further strained an economy already under severe pressure.

China’s cabinet called late Wednesday for banks, most of which are state-owned, to lend more money for the completion of unfinished apartments, following a similar directive by regulators put out hours earlier. China’s central bank, the People’s Bank of China, and the main bank regulator codified 16 measures on the same day to make sure that developers can borrow enough money from banks and bond investors, and can defer repayment when necessary. And on Friday evening, the central bank reduced by $70 billion the money that the country’s commercial banks are together required to hold for emergencies, freeing them to lend that money instead.

An affiliate of the central…

Keith Bradsher

2022-11-25 05:01:19

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