Chinese Government Allocates $20 Billion Fund for Urban Village Renovation Loans
The Chinese government allocates a $20 billion fund to their state-owned banks for special loans to renovate urban villages. This initiative aims to uplift and enhance the infrastructure in these areas.
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Special Loans for Urban Villages Renovation
On Thursday, Feb. 1, the central bank announced that the funds were disbursed to the export-import Bank of China, Agricultural Development Bank of China, and China Development Bank, all state-owned policy banks. However, the statement did not specify how the banks would utilize the funds. The administration of Guangzhou, located in the southern region of China, noted that the China Development Bank and the Agricultural Development Bank of China would issue credit lines totaling 142.6 billion yuan or around $20 billion to finance the reconstruction of "urban villages" in the city.
Moreover, the central bank reported that the outstanding balance of pledged supplementary lending (PSL) loans witnessed a decrease from 3.2522 trillion yuan or almost $458 billion at the end of December to 3.4022 trillion yuan or around 478 billion at the end of January. As part of an effort to bolster China's struggling real estate market and provide assistance to the economy, the Chinese cabinet presented in July its intentions to change 'urban village' in megacities, which are considered undeveloped locations.
On Tuesday, Jan. 30, the city administration announced in a statement that the first batch of 1.5 billion or more than $211 million in loans of this kind have been provided. As mentioned, the loans will be used for the acquisition of existing residences, the compensation of residents, and the construction of new dwellings. The loans were initially made available under the cabinet's initiative. Accordingly, numerous urban village redevelopment projects in several cities have received loans totaling 9.08 billion yuan or almost $1.3 billion from the China Development Bank.
On the other hand, China has recently announced new initiatives, one of which is loosening home-buying restrictions to boost the struggling real estate market. These steps come at a time when concerns about the liquidation of Evergrande are growing.
Expectations of further support for the real estate sector were stoked by the fact that the central bank granted loans to policy banks for 350 billion yuan or almost $50 billion through the PSL in December. This was the first monthly increase since late 2022. In addition, the PSL program, launched in 2014, was initially intended to assist during any property downturn by subsidizing urban redevelopment, which would increase prices.
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Cities that will Benefit from the $20 Billion Fund
On Tuesday, Jan. 30, the Guangzhou Municipal Bureau of Housing and Urban-Rural Development announced that 14 urban village renovation projects, which include Tan Village in the Luochongwei District of Baiyun District of Guangzhou City and Dali Village in the Minke Park Area, were given the first batch of 142.6 billion yuan or more than $20 billion in specialized financing from the China Development Bank and the Agricultural Development Bank. The China Development Bank granted the rural village renovation project in the Luochongwei area the inaugural national special loan of 100 million yuan or over $14 million.
A few days ago, Xi'an celebrated the arrival of the nation's first batch of special loans to reconstruct urban villages, successfully delivered on the same day. Furthermore, cities including Nanning, Hefei, Zhejiang, and Liaoning have all published the first round of plans to renovate urban villages. Thus, these cities typically intend to finish the renovation within three to five years.
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