China lifts policy bank loans, raising expectations for ailing housing sector

China’s central bank allocated 350 billion yuan ($49.1 billion) in loans to policy banks through its pledged supplementary lending (PSL) facility in December, according to data. This move has raised expectations of enhanced support for the struggling housing sector in the country. The People’s Bank of China (PBOC), in a statement on Tuesday, released the data without specifying how the China Development Bank, Export-Import Bank of China and Agricultural Development Bank of China would utilise the loans. This data marks the first monthly increase in PSL loans since November 2022. During the period from September to November 2022, the PBOC granted 630 billion yuan in PSL loans to bolster the Chinese economy amid the challenges posed by the COVID-19 pandemic. “The increase in PSL loans indicates that the quasi-fiscal policy is gradually gaining strength, and specific areas may be related to infrastructure construction, affordable housing construction, etc,” said Ma Hong, senior analyst at Zhixin Investment Research Institute. Beijing plans to provide at least 1 trillion yuan of low-cost financing to China’s urban village redevelopment and affordable housing programmes to shore up its struggling property market, Bloomberg News reported in November. Outstanding PSL loans were at 3.252 trillion yuan at the end of December, compared with 2.902 trillion yuan at the end of November, PBOC said. The PSL programme, initiated in 2014, was originally designed to help support any property downturn by funding urban redevelopment, pushing up property prices in the process. China relied heavily on PSL loans to support its shanty-town renovation during 2015-2018. With inputs from agencies.