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Chinese Real Estate Stocks Rebound on US$44 billion Bailout Hopes

  • While the People’s Bank of China has encouraged lenders to make more loans and to fund more mortgages, the combination of a slowing global economy and rolling zero-Covid lockdowns has dampened appetite for Chinese property.
  • With the State Council moving to raise a fund to shore up embattled real estate developers, China’s property crisis of its own making may avoid a messy unwind.

There’s little denying that China’s moribund real estate market needs a lot more assistance than rhetoric.

But so far, measures out of Beijing have been lackluster and noncommittal.

While the People’s Bank of China has encouraged lenders to make more loans and to fund more mortgages, the combination of a slowing global economy and rolling zero-Covid lockdowns has dampened appetite for Chinese property.

Homebuyers have withheld mortgage payments in protest of unfinished projects and the gloomy economic outlook has found a market replete with sellers, but few buyers.

Against this backdrop and to avoid an implosion of a significant sector of the economy, on Monday, China’s powerful State Council passed a plan to establish a real estate fund worth up to US$44.4 billion to prop up at least a dozen embattled property groups.

It’s believed that the monies will go some ways towards helping real estate developers complete their projects and hopefully stave off an implosion of the Chinese real estate sector which contributes an estimated 29% of the Chinese economy.

China’s State Council likely caved to public pressure after homebuyers across the country either stopped paying their mortgages or threatened to do so, as developers struggle to raise funds to build the homes promised.

Local governments across China have been forced to assume responsibility for stalled real estate developments and have reached out to state banks and asset managers to help fund completions, support that has been patchy.

But now with the State Council moving to raise a fund to shore up embattled real estate developers, China’s property crisis of its own making may avoid a messy unwind.

Ostensibly, it would seem as if the bailout should be welcome by real estate developers but given the current sentiment and property prices which are rapidly flatlining, if not declining, completing projects isn’t likely to turn a profit for developers.

Which is why the recent rally in Chinese property developers may be short-lived.

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