Chinese state banks have launched a concerted effort to strengthen the struggling construction market

 



The Chinese property sector has been plagued by construction delays after liquidity issues emerged at Evergrande, one of the largest and most indebted real estate firms in the country. The subsequent imposition of tighter controls by the Chinese government sparked a property crisis, and ever since, the construction industry has been facing severe headwinds. In a bid to revive economic growth and support the declining construction market, the Chinese government is now treating from tighter control to injecting billions of dollars into the property developers, a move that will counter the real estate crisis in the country.

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Many of the leading state banks have launched a concerted effort to strengthen the struggling property and construction market in China. The new policy support from the Chinese government has raised market sentiment while offering a ray of light for investors that the worst is over. Notably, in Q4 2022, the government announced that it is ready to deploy more than US$162 billion of credit from state banks to Chinese developers. This is one of the most significant liquidity boosts announced by the government yet to counter the crisis faced by developers in China.

·         In November 2022, the Bank of Communications, the sixth-largest bank by assets in China, announced a credit line of 100 billion yuan for Vanke and 20 billion yuan for Midea Real Estate. According to the bank, the credit line would assist the developers with project development, supply chain financing, and mergers and acquisition deals, among others.

·         Bank of China, the fourth-largest bank in the country, announced that it will also offer a credit line of 100 billion yuan for Vanke. On the other hand, the Agricultural Bank of China, the third-largest bank, announced a credit line for five developers in China. These include Vanke, China Overseas Land and Investment, Long for, China Resources Land, and Gemdale.

·         Industrial and Commercial Bank of China, the largest lender by asset in China, announced that it is extending a credit line of 655 billion yuan to 12 property developers. The Postal Savings Bank of China is among the other state banks that have also announced credit lines for the struggling construction market in the country.

Over the next few months, more state lenders are expected to announce credit support for property developers in a move that will ease out the liquidity crunch for property developers in China. Notably, the move from the Chinese government is one of its kind to support the sector which drives more than a quarter of economic output. The supportive tone from the Chinese authorities is consistent and in line with other measures announced in 2022.

Read More - The accelerated pace of construction activities driven by infrastructure investment in China

Previously the support measures announced by the government were all aimed at keeping the developers alive so that they can complete the construction of millions of pre-sold homes. However, this time the focus has shifted from survival to growth. The liquidity boost will allow developers to take on further projects and grow in the future. The vital pivot, this time, lies in the fact that the country is offering liquidity support to some of the big names in the Chinese construction industry. For instance,

·         Country Garden is one of the biggest beneficiaries of the announced credit lines for state banks. The property developer is expected to receive a 50-billion-yuan credit line from the Postal Savings Bank of China. Furthermore, it will also receive a part of the 655-billion-yuan new credit line announced by the Industrial and Commercial Bank of China.

With over 3,000 projects nationwide, the liquidity boost into Country Garden will not only support the growth of the construction industry but will also revive economic growth from the short to medium-term perspective. The policy support offered by the Chinese government has certainly resulted in sentiment change among investors, with many of the property stocks rallying due to the relief plan announced by Beijing.

 


Construction market size, Europe construction market report, Global construction market research, prefabricated Construction market size, Chinese property sector 


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