Beijing officials are calling on Chinese banks to speed up credit approvals for struggling investors in the real estate sector, as concerns grow about an impending “Lehman Moment” caused by the prolonged housing market downturn. For eight months in a row, home prices have fallen, property values continue to decline, and buyer sentiment weakens, while construction projects remain unfinished.

In an effort to boost sentiment and confidence in the real estate sector, Beijing has introduced a “white list” mechanism to support cash-strapped investors. The program, launched last week, covers both state-backed construction companies and private investors in need of new financing totaling 1.5 trillion yuan. Under this program, city authorities can recommend residential property development projects to banks for financial support. However, there are concerns that fast loan approvals could lead to lower loan quality.

By speeding up the approval of housing loans, Beijing hopes to revitalize the real estate market. Many Chinese banks are hesitant to increase credit exposure to the struggling real estate market, which has limited hopes for a real estate recovery and is constraining economic growth. Weakening consumer sentiment and growth prospects also weighed on credit demand and bank operations in China. Most of the five largest state-backed lenders will report lower net income for the full year 2023, reflecting a general slowdown in the banking sector.

By Samantha Johnson

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