PBOC Vows ‘Healthy’ Property Market Amid Evergrande Crisis

(Bloomberg) -- China’s central bank vowed to ensure a “healthy property market” and protect home buyers’ rights, suggesting more concern about the fallout in the industry after Evergrande’s debt crisis roiled global financial markets. 

The People’s Bank of China will work to safeguard the healthy development of the real-estate market and protect homeowners’ lawful rights, the bank’s monetary policy committee said at its quarterly meeting Friday, according to a statement released Monday.

The statement comes as one of the nation’s largest property developers, China Evergrande Group, buckles under more than $300 billion in liabilities and is on the brink of collapsing, which could leave 1.5 million buyers waiting for finished homes. The government has been steadily tightening restrictions in the property market to rein in financial risks, which have curbed investment and economic growth. 

“There may be fine-tuning of policies, even though a systemic relaxation of property curbs is unlikely,” Zhong Linnan, macro analyst at GF Securities Co. Ltd., said in a report late Monday. The rare mention of the property market in the committee’s quarterly meeting shows the PBOC’s concern over credit risks in the sector, he said.

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Analysts at Huatai Securities Co. Ltd. also said regulators may “fine-tune policies” if property prices start to fall, with possible options like loosening mortgage loan quotas. Protecting the “lawful rights” of homebuyers could mean that regulators will ensure troubled developers deliver on pre-sold homes, they said.

The monetary policy committee, chaired by Governor Yi Gang, said the central bank will step up coordination of monetary policy with fiscal policy as well as with industrial policies and regulations to achieve a balance between supporting the economy with finance and preventing risks. 

This means that the downward pressure on the economy from the property market and other policies to curb production cannot be offset by monetary policy alone and requires the coordination from various policies, said Li Yishuang, chief fixed-income analyst at Cinda Securities Co. Ltd.

The PBOC pledged to push real lending rates lower and said China’s economic recovery is “still not solid and not balanced.” That outlook was largely a repeat of the monetary policy report released in August, turning more cautious from the committee’s second-quarter meeting, when it said the economy was “operating in a stable manner with more strength and improvement.”

The PBOC reiterated that overall credit growth will become more stable to keep the macro leverage ratio steady. It kept the monetary policy stance largely unchanged, vowing to make good cross-cyclical policy design and keep liquidity reasonably ample. 

The necessity of a cut in the reserve requirement ratio is increasing, with the beginning of the fourth quarter as a potential window, as the gap between liquidity supply and demand is trending larger, Huachuang Securities Co. Ltd. analysts led by Zhou Guannan said in a report Monday. 

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