China banks approve loans under ‘whitelist’ project

China’s housing authority said 123.6 billion yuan of development loans have been approved and 29.4 billion yuan have been issued under a special mechanism aimed at injecting liquidity into the crisis-hit property sector.

Under China’s “whitelist” mechanism launched on Jan 26, city governments recommend residential projects to banks suitable for financial support and coordinate with financial institutions to meet project needs.

The mechanism is a key plank of Beijing’s efforts to stabilise the property sector’s debt crisis and boost confidence in an industry that accounts for a quarter of China’s gross domestic product.

So far 214 cities across the nation have set up the mechanism, recommending more than 5,300 projects to banks, according to statement from the Housing and Urban-Rural Development Ministry on Tuesday. Of this total, 29.4 billion yuan of loans involving 162 projects in 52 cities have been issued, it added.

Banks that decline any loan to the “whitelist” projects must provide a reason explaining their decision to the financial regulators, the ministry said.

The Hang Seng Mainland Properties Index rose 4.0 per cent by midday yesterday, versus a 3.0 per cent gain in the broader market.

China aims to ramp up financing for residential projects but banks’ reluctance to lend to the sector could be a major obstacle for distressed developers most in need of funds.

Developers and analysts have said any such loans can only be used for ensuring the completion of selected projects, and cannot be used to repay debt or help regain financial strength.