Communist China State-Owned Financial Institutions are Wary of Real Estate Bailout

According to media reports on August 25, some state-owned banks and financial institutions in China are rejecting the CCP government’s bailouts for the troubled real estate industry. Several people familiar with the matter said they are concerned about the impact of lending risks on their balance sheets.

 According to officials from two state-owned banks and three state-owned asset management companies, authorities have recently held several closed-door meetings. As a result, banks and other financial institutions, including securities firms, have been encouraged to support developers’ fundraising efforts. However, the authority has not issued a specific order.

 Given this, the senior management of these banks and organizations are generally skeptical about working with property developers who face severe cash shortages and face difficulties repaying their matured debts in time. At the same time, the authorities often hold financial institution employees accountable for their loan and investment decisions. Hence the overall wait-and-see and cautious attitude is generally presented. While they have received several rounds of “window guidance” or verbal guidance from regulators calling to support the real estate sector, the State-Owned banks and institutions appear to have not implemented them since the start of the year.