Chinese officials are being highly selective in their treatment of property developers, with some debt-laden private builders finding it almost impossible to get support from state banks, while others have been included on government ‘whitelists’ drawn up to encourage loans for ‘key’ projects.
State-backed entities have been favoured, partly because of the government’s greater capacity to exert control and get them to resume and complete projects for homebuyers.
China’s housing minister Ni Hong has reportedly warned that developers who “harm the interests of the masses” will be punished by not getting a major bailout.
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“For real estate companies that are seriously insolvent and have lost the ability to operate, those that must go bankrupt should go bankrupt, or be restructured, in accordance with the law and market principles,” Ni Hong was quoted as saying at a press conference on Saturday.
“Those who commit acts that harm the interests of the masses will be resolutely investigated and punished in accordance with the law,” he said. “They will be made to pay the due price,” according to a report by CNBC.
Ni Hong said China would improve home sales in a “forceful” and “orderly” way, as weak demand persists in the country’s beleaguered residential property market.
The executives of China Evergrande have faced criminal probes, while other developers are getting help from senior Chinese officials to ensure financial support.
Top officials seen helping China Vanke
Sources have told Reuters that Chinese regulators have been helping China Vanke, a state-backed property developer, by pressing large banks to enhance funding support and asking that holders of private debt extend the maturity on bonds or loans.
They said the financial institutions were asked to make progress quickly, and that the State Council – China’s cabinet – is coordinating effort related to supporting China Vanke.
Vanke declined to comment, while the National Administration of Financial Regulation and the State Council Information Office, which handles media queries for the council, did not respond to requests for comment.
Investors have dumped shares and bonds of Vanke in recent weeks on liquidity concern, amid reports that the developer, previously seen by the market as financially sound, was seeking debt maturity extension with some insurers.
“Banks to ensure (Vanke’s) financing; insurers to extend maturities for private debt; to guarantee the repayments of public bonds,” one of the sources said.
A separate source said last week that insurers such as Taikang Insurance, state-owned PICC Property and Casualty and New China Life Insurance, have received requests from Vanke for debt extensions.
Concern about Vanke’s financial health comes after a string of defaults by developers, including giants China Evergrande Group and Country Garden, since the country’s property sector slipped into a debt crisis in 2021.
Any repayment troubles at Vanke, one of the few remaining Chinese developers with investment-grade credit ratings, could further dampen market confidence, analysts explained.
Vanke said in a filing on Friday that it has deposited funds required to repay $630 million US dollar notes due on Monday.
- Jim Pollard with Reuters
NOTE: Further details were added to this report on March 11, 2024.
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