China is planning to allocate at least 1 trillion yuan ($137 billion) in low-cost financing to support urban village renovation and affordable housing programs. This move aims to bolster the struggling property market, with funds to be injected in phases through policy banks. The People's Bank of China is considering options like Pledged Supplemental Lending and special loans, signalling a significant effort to stabilize the property market amid its most significant downturn in decades. The initiative follows Beijing's recent announcement of fiscal stimulus measures and underscores China's commitment to supporting economic recovery and stabilizing consumer confidence.
China is planning to allocate a minimum of 1 trillion yuan ($137 billion) of low-cost financing to support its urban village renovation and affordable housing programs. This effort aims to bolster the struggling property market, as per individuals familiar with the matter. Funds will be injected in phases by the People's Bank of China through policy banks, eventually reaching households for their home purchases. Officials are exploring various options, including Pledged Supplemental Lending and special loans, with the government expected to initiate the process as early as this month. Vice Premier He Lifeng is spearheading this new initiative, signalling a significant escalation in the government's attempts to stabilize a property market facing its most significant downturn in decades. The ongoing property slump has had a profound impact on economic growth and consumer confidence, raising concerns about the financial stability of major developers, some of whom have defaulted recently. As of October, China's outstanding Pledged Supplemental Lending (PSL) stood at 2.9 trillion yuan. An injection of 1 trillion yuan into this lending facility would surpass the previous record set in 2019. However, the final amount of the new funding is subject to potential adjustments, according to insiders. Referred to by some as "helicopter money," PSL enables the central bank to offer low-cost funds to shantytown renovation projects' developers through policy and commercial lenders. Developers utilize these funds to acquire land from local governments, which, in turn, provide cash subsidies to households affected by the demolition of their old homes. This subsidy empowers them to buy newly built or existing apartments, thereby stimulating demand. This recent initiative follows Beijing's announcement of an unconventional fiscal stimulus last month, which involved increasing the budget deficit through an additional issuance of 1 trillion yuan in sovereign bonds. Despite a third-quarter improvement, China's second-largest economy continues to face challenges in its recovery. Upcoming official data is expected to indicate a slowdown in economic momentum for October, despite the headline numbers likely showing relative improvement compared to the previous year. In conclusion, China's commitment to injecting substantial funds into urban housing programs and renovation projects underscores its concerted efforts to bolster the property market. These measures align with broader strategies aimed at supporting economic recovery and stabilizing consumer confidence amid ongoing challenges.
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