The People's Bank of China and the State Administration Financial Supervision and Administration Bureau issued a notice on Monday July,10th, which extends the applicable period mentioned in the previously announced 16 financial policies to support the real estate market to December 31st 2024. The relevant person in charge of the People's Bank of China stated that this action is aimed at guiding financial institutions to continue to extend the stock financing of real estate enterprises and increase financial support for ensuring the timely delivery of presold homes.

We hereby notify the relevant extensions:

1. In terms of stock financing rollover, it was originally stipulated that “for those maturing within the next six months from the date of issuance of this notice, extensions for an additional one-year period beyond the original stipulation may be permitted". The adjustment stipulates that "if the loan is due before December 31st 2024, it can be allowed to be extended for one more year beyond the original provisions".

   
   

2. As the original provisions stipulate that " Within six months from the date of issuance of this notice, no downward adjustment of risk classification will be made to the matching financing issued to projects supported by special borrowings during the loan term; The loan-taking entities after the new and old debt classification are managed in accordance with the qualified borrowing entities. For the newly issued supporting financing to non-performing form, the relevant institutions and personnel have done their due diligence, can be exempted from liability". Following on from the recently announced adjustment, the applicable period will also be extended to December 31st, 2024.

Industry analysis points to this action being aimed primarily at the supply side of real estate, firstly by allowing the existing development loans and other financing channels to reasonably extend the repayment period, and secondly by encouraging financial institutions to provide financing support for the guaranteed deliveries of presold homes.

However, according to the Economic Observer report, the four major state-owned banks and joint-stock banks have multiple concerns about investing in distressed projects. A key factor is that several parties have different understandings of the  “guaranteed delivery of presold homes". In particular, the article mentioned:

For the housing system and the local government the "guaranteed delivery of presold homes" refers to the construction and delivery of problematic buildings, while from the perspective of financial supervision, they are focused on the fact that if a bank issues a mortgage loan for non-performing projects, the buyers may choose to halt mortgage payments, which will form a personal non-performing loan of the bank, and therefore encourages the bank to seek support for the financing of the guaranteed delivery of buildings.

Industry insiders have stated that since the beginning of this year, the financial management department has introduced a series of measures to address the financing issues of real estate enterprises. Starting from the stock and increment, it has increased its support for multi-channel financing such as loans, bonds, and asset management, maintaining the stable financing cash flow of high-quality real estate enterprises, and helped to guide the balance sheet of high-quality real estate enterprises to return to a safe range, and promoting the industry’s smooth transition to a new development model.

At PHC Advisory, our team is constantly monitoring the most recent incentives, subsidies, and exemptions policies accessible to businesses in China. Feel free to reach out to us at info@phcadvisory.com to find out more about preferential policies in China that your company could benefit from.