Recently, eight Chinese departments jointly issued the "Notice on Strengthening Financial Support Measures to Help the Development and Growth of the Private Economy", which contains 25 measures aimed at supporting the development of the private economy, especially focusing on the financing of private developers. The circular particularly stresses the need to proceed from the characteristics of the financing needs of private enterprises and strengthen the construction of diversified financing channels such as credit, bonds, and equity.
According to the fourth point of the notice, "take the initiative to do a good job in capital continuation services", it is clearly required that all relevant parties should conscientiously implement the previous notice on the steady and healthy development of the real estate market, maintain the stability of important financing channels such as credit and bonds, and reasonably meet the financial needs of private real estate enterprises. This news has given hope to many private developers, and they may have ushered in a new dawn.
However, the past two years have been a very difficult period for many developers, especially private developers. Many private developers are stuck with heavy debts, and some companies have even gone bankrupt due to excessive debt pressure. Even a leading developer like Evergrande is not immune. As we all know, changes in the financing environment for developers are one of the important reasons for this dilemma, especially in the past few years, when the three red line policies were introduced, the credit restrictions of banks have caused many developers to be unable to obtain loans, and even there have been loan drawdowns and loan breaks, making the already difficult cash flow more difficult.
The loss of developers' cash flow has created a domino effect. On the one hand, developers are unable to repay their debts due on time, and it is difficult for suppliers to settle their payments properly. In this context, many projects have been suspended or shelved, resulting in the inability to sell, which further aggravates the difficulty of recovering funds, which in turn directly affects the developer's ability to repay debts and project construction capabilities, forming a vicious circle.
However, the more difficult it is for developers to get into trouble, the more difficult it will be to raise funds. Banks must consider the potential risks associated with lending to developers, and will not dare to lend if the developers themselves face significant debt stress or even default. As a result, bank lending to developers has grown relatively slowly in recent years. According to the latest data released by the central bank, as of the end of the third quarter of 2023, the balance of RMB real estate loans in China was 5319 trillion yuan, down 02%；The growth rate of real estate loans decreased by 1 from the end of the previous year7 percentage points, 11 percentage points lower than the growth rate of various loans1 percentage point;In the first three quarters, it decreased by 33.3 billion yuan, an increase of 882.1 billion yuan year-on-year. In addition, as of the end of the third quarter of 2023, the balance of real estate development loans was 1317 trillion yuan, a year-on-year increase of 4%, the growth rate was only 03 percentage points. From these figures, it can be seen that the current bank support for new loans to developers is relatively small.
Now, with the joint release of a new policy by the eight ministries, making it clear that they will increase support for private enterprises and private developers to reasonably meet their financing needs, it will be easier for private developers to obtain loans from banks in the future. According to the requirements of the notice, major banks will conscientiously implement the "Notice on Doing a Good Job in Supporting the Stable and Healthy Development of the Real Estate Market in the Current Financial Sector" issued by the central bank, and play a more important role in supporting the credit of private developers.
Specifically, the circular mentions several aspects. First of all, it is necessary to treat state-owned and private real estate enterprises equally, reasonably distinguish the risks of project subsidiaries and group holding companies, and ensure that eligible real estate projects can receive reasonable financing support. Second, we will support the reasonable extension of stock financing, including development loans and trust loans. Thirdly, support high-quality real estate enterprises to issue bonds for financing and provide credit support. In addition, trust institutions are encouraged to provide financial support for real estate enterprise project mergers and acquisitions, commercial pension real estate rental housing construction, etc. It was also mentioned that development and policy banks will provide special loans for private developers, and commercial banks will focus on supporting the mergers and acquisitions of high-quality real estate enterprises and providing necessary credit support for construction enterprises.
If these financial measures can be implemented effectively, developers with stable fundamentals and only short-term liquidity will be able to receive more credit support. With credit support, developers can have more money to pay off debt, avoid defaults, and more money to build projects to ensure they are delivered on time. As long as the cash flow problem is resolved, I believe that the property market will gradually stabilize.
This is very helpful in alleviating the plight of developers and helping private developers get out of the predicament. If these private developers can get out of the predicament, it will have a positive impact on the development of both the property market and the economy.
All in all, with the issuance of a notice to support the development of the private economy, especially for private developers, it is foreseeable that it will be easier for private developers to obtain loans from banks in the future, which is good news for their development. It is believed that with the efforts of all parties, private developers can get rid of the predicament and make greater contributions to economic development.