China officials are reportedly pushing banks to rush loans to cash-strapped real estate developers

• Officials in China are pushing banks to rush loans for property developers, Reuters reported.

• The real estate sector is in a downturn, and many lenders are strapped for cash.

• The move could boost homebuyer sentiment, though it may also decrease lenders’ asset quality, per Reuters.

Officials in Beijing are pushing Chinese banks to rush loan approvals for property developers stuck in a prolonged downturn, according to Reuters.

China’s real estate woes over the last year have spurred concerns of an impending “Lehman moment” amid slumping property values, declining homebuyer sentiment, and a backlog of unfinished construction projects.

In February, home prices declined for the eighth consecutive month.

Reuters says authorities are testing a “whitelist” mechanism to prop up the sector’s cash-strapped developers in a bid to boost sentiment and confidence.

The program, which Reuters said Beijing initiated last week, covers state-backed construction and private developers that require new financing of 1.5 trillion yuan. It allows city governments to recommend residential property development to banks for financial support.

At the same time though, rushing loan approvals could result in diminished loan quality, the report notes. Authorities see faster loan approval for residential construction as a way to get real estate back on track.

Many Chinese banks have avoided increasing credit exposure to the country’s ailing property market. That’s limited hopes for a real estate rebound and in turn capped economic growth for several years, given how much the economy depends on the sector.

The banks themselves are also in a slump. Weak consumer sentiment and growth outlooks have tempered loan demand and business. Among China’s top five state-backed lenders, three will report smaller net income for the full-year 2023, and the other two will also see lower profits.

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