suggests that Beijing is struggling to find a solution for the increasing number of soured property loans on the books of smaller, regional lenders.Because financially strained property developers aren’t able to raise new funding, they’re forced to halt construction work on their unfinished apartments. And this means that potential home buyers are shying away, which makes it even harder for developers to raise the money they need to complete projects.
Instead, Chinese leaders appeared determined to continue to rein in excessive leverage in the property sector, even though their policies are dragging economic growth lower. And he is determined to deliver a strong message to local governments, property developers and to banks that Beijing won’t always bail them out.
Beijing, however, is keeping a tight control on local governments’ access to fresh funds. Thursday’s Politburo meeting announced no new special bond quotas – which local governments use to fund infrastructure spending – nor were they allowed to draw on future special bond allocations, as has been permitted in the past.