China struggles to implement property developer bailout amid ongoing housing slump

(MENAFN) China has made limited progress in deploying a central bank fund aimed at rescuing troubled property developers, as the country continues to grapple with a significant backlog of unsold homes and a prolonged housing downturn. In May, Beijing introduced a scheme involving up to 500 billion yuan (USD70 billion) in loans from the central bank and state-owned banks. The plan is designed to aid local governments in purchasing unsold properties, which would then be converted into social housing rentals. However, recent data from China’s central bank indicates that only 24.7 billion yuan has been disbursed so far under this initiative, prompting the central bank to pledge a faster rollout of the program.

The slow pace of implementation has been attributed to various challenges, including disagreements over property valuations between banks, local governments, and other stakeholders. Lisheng Wang, chief China economist at Goldman Sachs, highlighted these coordination issues as a key bottleneck in the process. The slow uptake of the bailout fund is occurring against a backdrop of declining housing demand and eroded consumer confidence, with real estate holding a substantial portion of household wealth in China. This has further complicated efforts to stabilize the sector.

Despite policy measures aimed at revitalizing the real estate market, the sector remains under pressure. New credit demand has dropped sharply, with total new yuan loans to the real economy turning negative for the first time since 2005 in July. Regional new home sales have halved compared to three years ago, and construction starts have plummeted by two-thirds from their early 2021 peak. This stark contrast between policy efforts and market realities reflects the broader challenges facing China’s housing sector.