China's real estate recovery plan boosts market

The market positively accepted the extensive package of measures laid out by Chinese regulators to support real estate financing. The list of liquidity measures outlined was hailed by analysts as a turning point in the market, with some even calling it "a welcome downpour after a long drought.

The emergence of these measures contributed to the unstable situation in the real estate sector. The sector was characterized by cash shortages, which meant a long struggle with defaults and suspended projects. All this undermined market confidence and put pressure on the world's second-largest economy. 

Previous attempts by policymakers to help finance have proved ineffective at bolstering the real estate market.

Tao Wang, chief economist for China at UBS Investment Bank Research, said they predicted real estate would be less of a drag on GDP growth in 2023.

Two sources told Reuters that a notice to financial institutions from the People's Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) outlined 16 steps to support the industry, including extending the maturity of loans.

According to Citi, this package signals a major shift in regulatory authority policy toward real estate developers. There will be a shift from imposing restrictions and providing support solely for projects to the rescue of both projects and developers.

The list is by far the most comprehensive set of support measures for the weakened real estate market.

This package, together with other recent measures, will provide about 1.3 trillion yuan ($183.83 billion) of credit to the real estate sector.

However, some investors remain cautious about the impact of the latest policy, as regulators have already made many attempts to revive the real estate sector and the macroeconomic situation remains weak amid COVID-related restrictions imposed in the country.

James Wong, portfolio manager of GaoTeng Global Asset Management Ltd, said a housing recovery is still necessary for a final recovery of the industry.