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Exclusive – Some Chinese financiers snub Beijing's source of real estate rescue calls

Xie Yu, Tan Engen and Julie

HONG KONG/SHANGHAI (Reuters) – Some state-backed financial institutions in China are resisting calls from Beijing to support the struggling real estate sector due to concerns The impact of such risks on its balance sheet, seven people familiar with the matter said.

In the absence of clear financial support from Beijing, senior executives at some institutions have expressed concern over cash-strapped developments, two sources said. Be cautious about dealing with business owners and subsequently dealing with their own potential losses.

Financial support for struggling developers has become an issue as authorities increasingly hold employees accountable for bad loans and investment decisions, two sources said.

Roughly a quarter of the economy has been teetering between crises since summer 2020 as regulators stepped in to cut excess leverage in the industry, causing some developers to default on debt and struggle Complete the project.

Real estate investment, home sales and new construction are plunging as trouble scares off potential buyers.

Last week, Reuters quoted sources as saying that China’s banking regulator is reviewing real estate sector lending. As the debt crisis in the property sector worsens, some local and foreign lenders are assessing systemic risks .

The reluctance of some Chinese lenders suggests Beijing faces challenges and limited options to help revive the industry.

Chinese authorities have held several closed-door meetings in recent weeks to encourage banks and other financial institutions, including securities firms, to support developer financing, two sources said.

Although the People’s Bank of China (PBOC) has been pushing state-backed financial firms to back strong developer financing, it has so far not issued specific command.

Officials at two state-owned banks and three state-owned asset management companies said that despite several rounds of regulatory “window guidance” — verbal instructions given by regulators to mostly Chinese companies — they have It has been reducing its holdings of real estate bonds since then.

All sources declined to disclose this information due to the sensitivity of the matter.

The People’s Bank of China and the China Banking and Insurance Regulatory Commission (CBIRC) did not respond to Reuters’ requests for comment.

Market pessimism

While the rapid expansion of banks’ loan exposure to developers is a moral hazard for Beijing, Beijing introduced A few years ago, the authorities have directed strong builders to also issue onshore bonds to restore normalcy in fundraising activities.

Lending by Chinese banks to developers fell 36.8% year-on-year in July, while the offshore bond market plunged 200%, according to a Reuters calculation of National Bureau of Statistics (NBS) data.

Onshore bond issuance in July rose 4.2% from June to RMB 32 billion. To researcher CRIC. The biggest issuers this month were mostly state-owned or backed developers, including China Vanke and China Jinmao.

Onshore bond issuance expected to rise – Developer shares and some bonds rebounded last week after media reports said Beijing would guarantee new onshore bond issuance by a handful of high-quality private companies.

As part of the move, Longfor Group Holdings announced on Tuesday a bond offering of up to 1.5 billion yuan ($218.54 million). Expect more in the coming days.

Chinese financial companies are usually the main subscribers of these new products by local companies. This time around, however, some of them aren’t even looking to buy new notes from developers with relatively strong balance sheets.

“We cannot afford volatility before maturity. It will screw up our accounts,” a credit analyst at a Shanghai-based state-backed asset manager said of developers’ interest in new bonds expressed interest.

“Analysis doesn’t work anymore because pessimism has taken over the market…Anything related to real estate is out of the question,” said the credit analyst, speaking on condition of anonymity. Talk to the media.

Longfor declined to comment.

Huarong Asset Management, one of China’s four largest state-owned non-performing loan management companies, has been tasked with looking at some stagnant real estate projects, but has overlooked many, one involved in these “We need some reassurance that we will be repaid at least part of the money,” the official said.

The official said, adding that banking regulators will visit their office to assess property risks.

Huarong did not respond to a request for comment.

Some developers are also finding that state pledges to stabilize the industry don’t necessarily translate into more bank money as they scramble to finish condo construction to appease threats to stop mortgage payments of home buyers.

An industry source close to the developer said it is not easy to issue bonds now as it is difficult to find buyers and many investors are trying to sell their properties. Banks may also not have sufficient purchase quotas for all issuers, the sources added.

(1 USD=6.8636 RMB)

(Reporting by Yu Xie and En En by Tham, Julie Zhu, Clare Jim, Kevin Huang; Editing by Sumeet Chatterjee and Kim Coghill )



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