The move could be a major boost to ease the property crisis that has dogged the world’s second-largest economy for years. As part of new policies to support the property sector, regulators are considering allowing banks to provide additional working capital loans to some businesses.
Unlike other loans that typically require land or real estate as collateral, this loan contract is unsecured and mainly serves the short-term operating needs of the business, according to Bloomberg .
Regulators are also considering introducing a mechanism that would allow a bank to take the lead in supporting a troubled real estate company by working with creditors to work out a financial plan for the company.
If approved, the new support measures would be the most aggressive step yet by the Chinese government to rescue the housing market, with Nomura bank estimating that developers will need about $446 billion to complete millions of unfinished projects.
China may for the first time allow banks to issue short-term unsecured loans to eligible businesses (Photo: iStock)
China is also stepping up support for its economy, with moves this week showing Beijing must act quickly to stem the property slump.
"This measure can ease people's concerns about unfinished projects, which have weighed on home sales recently," Niu Chunbao, a fund manager at Shanghai Wanji Asset Management, told Bloomberg .
"I think monthly home sales will recover slowly once new lending packages are implemented," the expert predicted.
China’s previous measures have largely failed to stem the property crisis. Businesses remain cash-starved, delaying construction and home deliveries and robbing the economy of growth momentum.
Beijing has previously loosened home mortgage requirements, reduced down payment requirements and pledged special loans to boost home deliveries.
Policymakers are rushing to finalize a list of 50 real estate companies eligible for financial support, including Country Garden, Sino-Ocen Group and Cifi Holdings, a move that shows Beijing’s willingness to support businesses in crisis.
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