China Loosens Restrictions On Real Estate Industry In Significant Policy Reversal

Beijing's Central Business District, Seen In September 2021

Chinese real estate companies, along with their foreign investors and partners, can exhale somewhat for the first time in years.

The People’s Bank of China and the China Banking and Insurance Regulatory Commission jointly issued a 16-point plan on Friday to ease restrictions on the country's real estate industry and provide assurance that the government will provide support to prevent a financial collapse, Bloomberg reports.

Some of the new measures pare back or reverse restrictions put in place in August 2020 that precipitated a liquidity crisis at several developers, most notably China Evergrande Group. Among the 16 points are:

— Directing lenders to treat private and state-run developers equally.

— Allowing developers to extend debt due to mature in the next six months for up to a year.

— Instructing the country's finance industry to support the completion of construction projects and the acquisition of struggling developers by healthier companies.

— Making it easier for first-time buyers to afford homes and for mortgage borrowers to repay loans.

PBOC and CBIRC, the two major financial bodies, also set in motion plans to introduce bankruptcy restructuring and real estate investment trusts as options for companies, Bloomberg reports.

In a separate announcement Monday, China also granted an exception to a ban on developers using cash from property pre-sales to fund completion of ongoing construction projects.

The group of initiatives prompted a wave of confidence to flow into market values, with Country Garden Holdings, one of the biggest developers in China, gaining over 50% in Monday trading, CNN Business reports.

An additional announcement of modifications to China's Zero-Covid policy combined with the property market changes give hope the Chinese economy can recover from losses it has suffered over the past year. But a major turnaround could be months away at least, according to separate reports from Bloomberg and the Guardian.

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