China unveils $137bn plan to revitalise property market amid economic challenges 

China is contemplating injecting at least 1 trillion yuan ($137 billion) into its urban village renovation and affordable housing programs, in a bid to revive its struggling property market, Bloomberg reported on Tuesday, citing sources familiar with the matter.

The People's Bank of China plans to channel these funds through policy banks, with the aim of supporting households in their pursuit of home purchases. The move, spearheaded by Vice Premier He Lifeng, signals a vigorous attempt to counter the profound slump in the property sector, a downturn that has significantly impacted economic growth and consumer confidence.

The proposed initiative involves leveraging financial tools such as the Pledged Supplemental Lending (PSL) and special loans. If implemented, this program could mark a pivotal step in the government's comprehensive strategy to stabilise the housing market, considered the most severe downturn in decades.

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Market concerns have surged regarding the financial health of China's prominent developers, particularly after a series of record defaults within the industry. The injection of funds aims not only to rejuvenate the property market but also to foster a more balanced and sustainable development trajectory for the long term.

The PSL program, sometimes dubbed as "helicopter money," allows the central bank to provide low-cost funds to developers engaged in tenement renovation projects. This involves developers using the funds to acquire land from local governments, which then offer cash subsidies to households affected by demolitions, spurring demand for newly-built or existing apartments.

Analysts believe that the funding could generate over 10 trillion yuan in overall direct investment, driving private investment in the sectors. According to Bloomberg, Bruce Pang, Chief Economist for Greater China at Jones Lang LaSalle Inc., emphasised, "This is not to spur growth but rather deliver a more balanced development for the longer term."

However, it is worth noting that the PSL program has a controversial history. Initially deployed in 2014 to counter a property market downturn, it faced criticism for contributing to a real estate bubble in lower-tier cities. The central bank reduced its provision of new PSL funds in 2019 as projects concluded. However, the program experienced a brief re-launch last year to aid policy banks, which prioritise public service over profit, in financing infrastructure development.

This latest plan follows Beijing's unconventional fiscal stimulus announced last month, including a budget deficit increase through the issuance of an additional 1 trillion yuan in sovereign bonds.

While economic data for the third quarter suggested a gradual recovery, official data anticipated to be released on Wednesday is expected to reveal a faltering economic momentum in October.

(With inputs from Bloomberg)

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