China’s central bank has pledged to provide RMB 300 billion ($41.6 billion) in cheap loans to enable financial institutions to lend to local state-owned enterprises (SOEs) so they can buy up built but unsold apartments and then resell or lease them as affordable housing, reports Caixin. The move announced on Friday is China’s latest initiative to shore up the beleaguered property market. Other measures include scrapping the nationwide minimum mortgage interest rate and cutting the minimum down-payment ratio.
The one-year loans, with an interest rate of 1.75%, are extendable for up to four times and will be offered to 21 banks, including state-owned commercial banks, joint-stock banks and policy banks, Tao Ling, deputy governor of the People’s Bank of China (PBOC), told reporters at a State Council routine briefing. The central bank expects to release RMB 500 billion in financing to the SOEs, Tao said.
The program will work along similar lines to the PBOC’s existing structural monetary policy tools, leaving financial institutions to independently decide whether to grant loans to a SOE while also setting the terms for the loan, Caixin learned.