Beijing [China], August 9 : The Chinese authorities have planned to use regional bonds to fund their project of purchasing idle land from cash-strapped property developers of China intended for the construction of affordable housing, Nikkei Asia reported.
Notably, this move comes at a time when the Chinese economy is currently witnessing a severe dip in the property sector.
These special-purpose bonds were first rolled out in 2015 as a way by which the Chinese government could fund their infrastructure projects, including economic development zones and roads.
As the country suffers from a crisis, a portion of the proceeds is expected to be used to acquire undeveloped land and unfinished buildings from real estate developers in the country, Nikkei Asia.
Currently, the statistics of China's new-home sales by area fell around 22 per cent in the first half of the year, starting in January to June, the same news report said, citing the National Bureau of Statistics.
In China, strapped for cash, real estate companies have been unable to start developing new plots and sustain themselves in the noose-diving property market of the country.
The Chinese government, by the move, plans to provide financial relief to struggling real estate developers in China and encourage the effective use of land through the planned purchases.
In May of this year, the central government of China announced a borrowing programme to push local authorities to buy up unsold housing stock. However, not much has been achieved under the initiative.
This latest proposal of the Chinese government could bring an even worse era for Chinese finances if the planned new affordable housing strategy fails to generate revenue for the government.
Other than funding infrastructure, special-purpose bonds have been bringing up the troubled small and midsize banks of the country since COVID-19 in 2020.
Meanwhile, the sales of use rights to state-owned land, which is a key revenue source for governments, has also witnessed a fall amid the real estate slump in China in 2023 from the peak marked in 2021, the Nikkei Aisa report claimed.
Naoki Tsukioka of Mizuho Research and Technologies, regarding the matter, said, "China's central government is putting the responsibility for addressing structural problems on the shoulders of local governments. Unless the central government expresses a serious commitment to resolving the issue, such as by rolling out fiscal stimulus, it will be difficult for the real estate sector to emerge from the downturn."
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