Chinese regulators are pressuring banks to approve new loans to cash-strapped private real estate developers more quickly to boost purchaser confidence and potentially damage lenders’ asset quality.
The initiative uses the “whitelist” mechanism, Beijing’s most recent support move, to ease the sector’s liquidity pressure and encourage home purchases.
Despite repeated proddings from Beijing, leading domestic banks have refrained from dramatically increasing their lending exposure to the crisis-hit sector, dashing hopes of a rebound in an industry vital to the economy.
The “whitelist” scheme involves projects by state-backed and private developers that require additional funding totaling 1.5 trillion yuan ($207.51 billion).
The National Financial Regulatory Administration (NFRA) has given banks till the end of June to complete the approval and issuance of all loans.
Concerns over the effects on their asset quality and profitability are the reason Chinese banks are reluctant to provide new credit to the struggling real estate industry.