Hong Kong Bauhinia Magazine:

How was credit growth in the real estate sector in 2022? In the recent meeting on credit work, it was proposed to improve the balance sheets of good-quality real estate developers. What new policies will be adopted to ensure the stable development of the real estate sector? Thank you.

Zou Lan:

Thank you for your questions. Positive circulation in the real estate sector is of great significance for the sound development of the economy. The Central Economic Work Conference has made clear that the steady development of the real estate market must be ensured; reasonable financing needs of the real estate sector should be met; effective measures should be taken to prevent and mitigate risks associated with leading real estate developers; different policies should be adopted in different cities as appropriate to their local conditions; people's justified housing need and the need to improve their housing situation should be supported; the principle that houses are for living in, not for speculation should be upheld; and the smooth transition of the real estate sector toward new development models should be advanced. In response to the adjustments in the real estate market, the PBC, together with relevant departments, has worked to improve both supply and demand in accordance with the arrangements of the CPC Central Committee and the State Council to promote stability in the real estate market. As relevant policies gradually produce effects, we notice that recently the financing environment in the real estate sector, especially for quality real estate developers, has been significantly improved. I would like to present two figures here. From September to November 2022, loans to real estate development increased by over 170 billion yuan, 200 billion yuan more than the increment of the same period of the previous year. In the fourth quarter of last year, bonds issued by real estate developers in China were worth over 120 billion yuan, a year-on-year increase of 22%. According to the specific arrangement made by the Central Economic Work Conference, the PBC and relevant departments recently proposed to improve the balance sheets of good-quality real estate developers. Earlier this year, the PBC and the China Banking and Insurance Regulatory Commission jointly held a symposium on credit work. That proposal was an important part of the symposium, which has also been released on the official website of the PBC. According to information publicly disclosed by developers, over the past decade, the balance sheets of the real estate sector in China have gone through rapid expansion. The assets of the top 50 real estate developers in China have grown by 10 times, with some growing by 23 times. Meanwhile, the liability structure of the real estate sector is highly diversified, among which financial liabilities only account for 31%, including 14% in development loans from banks, 9% in foreign and domestic bonds, and 8% in financing via non-standard credit assets. Others mainly consist of funding for projects in advance from upstream and downstream enterprises, making up 30%, the personal house payments collected in advance, accounting for 32%, and delayed tax payments and payments on land purchases, representing 7%.

To implement the arrangement made by the Central Economic Work Conference and prevent the spreading of risk from property developers with financial problems to good-quality ones, relevant departments have drafted an action plan to improve the balance sheets of good-quality real estate developers. Targeting quality property developers who focus on their core businesses and are characterized by compliant operation, good qualification, and of systematical importance, the action plan gives priority to advancing 21 tasks in four aspects, including activating assets, sustaining liabilities, replenishing equity, and improving expectations. By taking a holistic approach, the plan aims to improve the cash flows of high-quality developers and guide their balance sheets back to the safety zone. The tasks include both measures to ensure the implementation of the policies that have been issued and a series of new measures, such as setting up special re-lending for national asset management companies and loan programs supporting rental properties. There is no specific list of good-quality real estate developers in the plan, and financial institutions can make their own decisions.

Concerning the "three red lines" rules on real estate developers, the plan has specified that the rules targeting 30 pilot developers will be optimized. While the overall framework of the rules remains unchanged, some parameters will be improved.

That's all for my answers. Thank you.