In "Significant Shift" To Bailing Out Its Sinking Property Sector, China Puts Largest Developer On Rescue "White List"

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by Tyler Durden
Thursday, Nov 23, 2023 - 12:30 AM

In a move which analysts say marks a "significant shift" in Beijing's strategy to assist distressed builders and boost confidence in China's sinking housing sector amid the deepening property crisis, overnight Beijing included property giants Country Garden Holdings (whose collapse would be orders of magnitude worse than that of Evergrande) and Sino-Ocean Group to China's draft list of 50 developers eligible for a range of financing support which we profiled earlier this week

As Bloomberg anchor Sofia Horta e Costa notes, "Country Garden was previously the leading developer by sales with numerous ongoing construction projects. If China aims to bolster confidence among homeowners and buyers, ensuring that projects will be completed and delivered seamlessly even in the event of a developer default, then this is the way to go."

CIFI Holdings Group, another builder that has missed debt payments, was also included on the white list according to Bloomberg, which adds that regulators are set to finalize the roster and distribute it to banks and other financial institutions within days.

The inclusion of distressed builders such as Country Garden, which missed payments on a dollar bond for the first time last month, underscores regulators’ shifting stance toward some of the nation’s biggest private developers as the refusal of the relentless property crisis to ease. Chinese President Xi Jinping has also stepped up support for the broader economy, issuing more sovereign debt for infrastructure spending, raising the budget deficit ratio and even making an unprecedented visit to the central bank.

Then again, not a day goes by this year when we are not inundated with the latest Chinese "news" and "plans" of a moderate stimulus, one which never actually materializes, however, and which is just recycled into the next newscycle where readers completely forget that they are just reading recycled news over and over.

And this time was no different because a Bloomberg index of Chinese developer stocks rallied this week on expectations that the financing help may alleviate fears of further contagion in China’s property sector. Still, some investors were concerned the list would mainly comprise state-owned firms and leave out distressed builders most in need of the support. Gemdale, which hasn’t missed any debt payments, is also on the draft list along with China Vanke, Seazen and Longfor Group.

Even if Beijing has finally decided to step in and bail out its long-suffering housing sector, there is no guarantee that the aid isn't a case of too little, too late. Country Garden, which is bigger than Evergrande was at its peak, has property developments in almost every province in China, and in October posted its biggest sales drop in at least six years. Growing concerns among potential buyers of its ability to complete projects threaten to exacerbate a cash crunch.

Speculation over Country Garden’s fate flared anew earlier this month after Reuters reported that China’s State Council instructed the government of Guangdong province to ask Ping An Insurance (Group) Co. to take a controlling stake. Ping An said it doesn’t hold any shares in Country Garden and has no plans to acquire it.

China’s property crisis has engulfed almost all of the largest developers, which have been struggling to repay debts and complete projects since the credit crunch emerged three years ago. Vanke, one of the country’s few remaining investment-grade builders, saw its dollar bonds plunge in recent weeks on the heels of Country Garden’s default. Vanke later received an unusually strong show of support from the local government.