China’s $44 Billion Investment For Recovering Real Estate
According to a state bank official with firsthand knowledge of the situation, China will establish a real estate fund to aid developers in resolving a crushing debt issue, aiming for a war chest of up to 300 billion yuan ($44.4 billion).
The fund’s initial size will be set at 80 billion yuan with help from the China Construction Bank (OTC: CICHF) and the People’s Bank of China (PBOC). He noted that if the concept is successful, other banks would adopt it to raise up to 200 to 300 billion yuan. According to the source, as part of the government’s effort to increase rental housing, the money will be used to finance the purchase of incomplete house projects, finish their construction, and then rent them to individuals.
China’s Focus Remain on Real Estate
The Hang Seng Mainland Properties Index rose more than 5 percent early on Monday because of the most recent news; by lunchtime, it had increased by 3.4 percent. The CSI 300 Real Estate Index increased by about 2.0%. Over the last year, the debt crisis in the real estate market has had a significant negative impact on the economy, leading the government to provide a range of assistance measures to stabilize the industry.
The real estate fund’s specifics were originally revealed on Monday by financial information provider REDD. According to REDD, which cited unnamed sources, the fund will assist more than a dozen real estate firms, including the troubled China Evergrande Group.
According to the article, the fund has obtained 50 billion yuan from China Construction Bank and a 30 billion yuan refinancing facility from the People’s Bank of China (PBOC), and it might be expanded to 200 to 300 billion yuan.
The fund might be used to purchase financial instruments produced by the developers or finance state purchasers’ acquisitions of their projects, according to REDD, who also stated that regulators and local governments would choose the developers eligible for help from the fund. According to the article, Beijing is also preparing a national strategy for the issue of special bonds for the reconstruction of shantytowns.
