What’s new: Longfor Group Holdings Ltd. became the first Chinese property developer to receive offshore loans from a state-owned bank as part of the government’s array of efforts to bolster the long-troubled real estate sector.
Bank of China, one of China’s four largest state-owned banks, offered 700 million yuan ($100.8 million) of offshore loans to Longfor. The funds were drawn down Dec. 9 to meet the developer’s liquidity needs, the lender said.
Bank of China said the loans are an important measure to implement the directions of the central bank and the China Banking and Insurance Regulatory Commission, carry out a strategic cooperation agreement with Longfor, and support the stable and healthy development of the real estate market.
In the next stage, Bank of China will meet the reasonable financing needs of real estate enterprises through various means to maintain overall economic and financial stability, the bank said.
The background: Chinese developers fell into distress during a property slump that’s hurt the world’s second-largest economy and prompted regulators to formulate a sweeping rescue plan for the industry.
In a Nov. 21 meeting, China’s central bank and the top banking regulator encouraged domestic banks to issue offshore loans to help developers repay overseas debt. The regulators loosened restrictions on a lending mechanism that allows a property enterprise on the Chinese mainland to apply for financing guarantees from a domestic bank, enabling their overseas units to apply for loans from offshore branches of the bank.
Since mid-November, a wave of supportive measures has been unveiled to prop up the property market, which has been mired in a record slowdown and deepening liquidity crunch for more than a year. They include a government-backed bond issuance program, relending quotas to support unfinished projects and eased restrictions on developers’ access to pre-sale funds. The measures are set to inject hundreds of billions of yuan in new funding into the property sector.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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