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China had to cope with old and new challenges in the past month amid a worsening real estate crisis and severe heat waves.
The housing market in the world’s second-largest economy weakened further amid shaken confidence, despite support from stakeholders ranging from financial regulators and local governments to banks and state-owned enterprises.
Meanwhile, the worst heat waves in at least 60 years hit parts of the country. A severe drought dried up reservoirs and crippled hydropower stations in Sichuan province, sparking calls for a rethink of coal’s role in the nation’s energy mix.
In addition, an anti-corruption storm has swept through China’s semiconductor industry that is at the heart of the country’s quest for technological self-sufficiency.
In Depth: Bailouts Multiply as Pressure Mounts to Stabilize China’s Housing Market
Efforts to halt the slump in China’s housing market are gathering pace as local governments, banks, state-owned enterprises (SOEs), asset management companies, and shareholders pump money into unfinished projects and cash-strapped developers.
A meeting of the Politburo on July 28 called for action to “stabilize the real-estate market” and the use of “city-specific policies.” It also told local governments they would be responsible for ensuring the “timely delivery” of homes under construction that have already been paid for.
The top leadership’s demands followed the emergence of a mortgage boycott at hundreds of unfinished developments across the country as thousands of angry homeowners protested about repaying loans on unfinished properties. Their action has fuelled concerns that banks, already heavily exposed to the property sector, could face another wave of non-performing loans.
Exclusive: Regulator Moves to Help Struggling Private Developers with Bond Guarantee
China’s bond market regulator is pushing forward a plan to help the country’s cash-strapped property developers sell bonds in the latest move to shore up the ailing real estate sector.
The National Association of Financial Market Institutional Investors (NAFMII), the interbank bond market self-regulatory body under the central bank, held a meeting with several private developers to discuss potential credit guarantees to back their borrowings from the bond market, Caixin learned from people familiar with the matter.
The NAFMII meeting followed previous discussions about financing guarantees for certain developers. Caixin reported that regulators have selected six developers for a pilot program in which China Bond Insurance Co. Ltd. will provide direct guarantees for bonds or asset securitization products issued by the companies.