SHANGHAI/BEIJING (Reuters) -Chinese regulators stepped up efforts to encourage lenders to extend loans to qualified real estate projects as the beleaguered property sector faced fresh risks from a widening mortgage-payment boycott on unfinished houses.
The China Banking and Insurance Regulatory Commission (CBIRC) told the official industry newspaper on Sunday that banks should meet developers' financing needs where reasonable.
The CBIRC expressed confidence that with concerted efforts, "all the difficulties and problems will be properly solved," the China Banking and Insurance News reported.
The remarks come as a growing number of homebuyers across China threatened to stop making their mortgage payments for stalled property projects, aggravating a real estate crisis that has already hit the economy.
The latest news helped banking and property stocks recover some of their recent losses. China's banking index, which tumbled 7% to a more than two-year low last week, bounced 1.4% on Monday. Chinese real estate stocks gained 3.1% on the mainland, and jumped 3.7% in Hong Kong.
The rebound in Chinese banking stocks was also aided by news that China will accelerate the issuance of special local government bonds to help supplement the capital of small banks, part of efforts to reduce risks in the sector.
China may also allow homeowners to temporarily halt mortgage payments on stalled property projects without incurring penalties, Bloomberg reported after the market close on Monday, citing people familiar with the matter.
The report added that homeowner eligibility and the length of grace periods would be decided by local governments and banks, and the yet-to-be-finalised proposal from financial regulators would require approval from senior Chinese leaders.
HOPING FOR STABILITY
Official data on Friday showed output in the property sector shrank 7% in the second quarter from a year earlier, marking the fourth straight quarter of decline.
New real estate loans in June were expected at more than 150 billion yuan ($22.23 billion), compared with a contraction in May, state television CCTV reported on Monday.
"I think the Chinese government has the will and means to solve the problem, and will likely take swift actions," said Mark Dong, Hong Kong-based co-founder and general manager of Minority Asset Management.
"The biggest risk is impairment to consumer confidence, which threatens the nascent recovery in property sales."
Dong expects state-owned developers to step in and acquire troubled projects from heavily-indebted private peers, accelerating an industry consolidation.