China banks told to bail out property developers as mortgage boycotts threaten economy

theguardian.com:

Chinese banks have been told to bail out struggling property developers to help them complete unfinished housing projects and head off the growing mortgage strike that threatens to seriously damage the economy.

With thousands of homebuyers banding together to refuse to keep up with mortgage instalments on unfinished apartments bought off the plan, regulators have stepped up efforts to encourage lenders to extend loans to qualified real estate projects.

The China Banking and Insurance Regulatory Commission (CBIRC) told the official industry newspaper on Sunday that banks should meet developers’ financing needs where reasonable.

The CBIRC expressed confidence that with concerted efforts, “all the difficulties and problems will be properly solved”, the China Banking and Insurance News reported.

Chinese bank shares still rallied on Monday in wake of the regulator’s intervention and a belief that the government in Beijing will have enough policy measures at its disposal to control the situation.

However, it was not clear whether the banks would be able to absorb the cost of the mortgage strike, which is affecting an estimated 100 projects in 50 cities.

The value of the mortgages involved amounts to 2bn yuan ($300m), according to data from the banks on Friday, but some analysts think the real figure is much higher. GF Securities in Guangdong, for example, said that the amount could be 2tn yuan ($300bn).

The property sector in China, which accounts for up to 30% of economic output, has been in crisis since the slow collapse of the second biggest developer, Evergrande, began last year. Since then the toxic fallout from its default on a large part of its $300bn debt mountain has started to spread throughout the economy.

As the