China reduces the pressure on the commodity sector but change remains in the forefront

Chinese regulators have eased builders’ pressures by releasing debt consolidation and allowing more bond issuance in recent weeks in an attempt to prevent the sector from collapsing. But government analysts and advisers say this does not mean the removal of President Xi Jinping from office.

Real estate is estimated to account for one third of the global economic activity, highlighting the need for any change in policy. These companies have been struggling in recent weeks to deal with a financial problems which has driven major developers in the country, such as Evergrande, to the point of getting worse.

“There are risks that come as a result of the economic downturn,” said Deng Haozhi, a geologist at Guangzhou. “It’s up to the directors to avoid this.”

“All our previous attempts to control the real estate market have failed because we have left the middle of the restructuring process,” said a Beijing legal adviser. “Today the central government is determined to adhere to this policy.”

Mortgage lending rose 1 percent in October, ending four consecutive months of the year, according to Wind data, Zou Lan, chief financial officer at People’s Bank of China, said some banks had misinterpreted Beijing’s housing policies. .

The aim, Zou said, was to curb lending to companies with more assets than to restrict lending to development loans. “We have advised major banks to maintain real estate and mortgage lending regularly and systematically,” he added.

Bank officials in Beijing and Shanghai told the Financial Times that the repayment deadline had dropped from six months in September to less than three. “We have done very carefully in the past,” said China’s Merchants Bank. “Now we’re back to normal.”

Offering bonds with manufacturers is also starting again. As of November 10, more than a dozen governments have announced plans to raise Rmb28.8bn ($ 4.5bn) with low interest rates on the interbank market, which builders have been struggling to find.

Zhejiang China Commodities City Group Co., a developer based in the eastern part of Zhejiang, just took five days last week to get a nine-month sales permit, Rmb1bn note this week. “In the past, this project could easily have gone on for over a month,” said the company executive. “Now everything is in a hurry.”

The release of this policy has come too late for those with large debts in the country, such as Evergrande and Kaisa. The authorities expect to be able to restructure the supply chain, which could lead to more companies, according to two Evergrande executives.

“It would not be a problem if several developers left,” said Bo Zhuang, a Singapore specialist at Loomis Sayles, a property manager. “But Chinese officials need to make sure that this change does not kill all companies.”

Debt management says they do not want to help more and more builders, especially after the number of sex workers fell nearly a quarter of a dollar in October compared to the same month last year.

“We do not expect real estate prices to recover immediately because real estate buyers expect lower prices,” said China’s Merchants Bank. “This could jeopardize the ability of manufacturers to make money on debt.”

Prices for new homes fell in September and October, and buyers are also concerned about government initiatives. property tax in other cities. “Buyers are waiting until they know how much the tax will affect them,” said the debtor.

An official in Kaisa, who missed a refund of several dollars this month, last week told a closed corporate meeting that the company had not benefited from the recent changes. “We are in a very difficult situation,” Li said, according to FT.

At a meeting held last week with China Index Academy, a consultant, it was revealed that 15 of China’s top 50 manufacturers tested by sales by 2020 – including 10 state-owned and five private companies – have “good weather” ability to fight climate. dangerous.

Evergrande and Kaisa did not respond to a request for comment.

Developers are also undermined by the government’s continued oversight of the previously sold economy, which in the past has been used to cut back on revenue opportunities. In recent months, more than 22 cities have announced laws restricting spending on the project.

Sunshine City Group Co., a developer based in Fujian province, southeast of China, recently asked for a $ 650m increase in funding despite announcing more than Rmb27bn in September. Most of his money was confiscated from government-run accounts for certain services, according to people close to the company.

“How can we find other ways to raise money when our billions of dollars can’t be spent on debt,” the Sunlight City official complained earlier this month in an open letter on television.

Additional reports of Tom Mitchell in Singapore and Xinning Liu in Beijing