China Doubles Down: No Bailouts for Struggling Developers

China’s housing minister, Ni Hong, announced that Beijing will not provide financial assistance to the country’s ailing property developers. In a press conference last Friday, Ni stated that “real estate companies that are severely insolvent and can no longer operate must go through bankruptcy and restructuring, following legal principles and market mechanisms.”

This statement clarifies China’s approach to its ongoing real estate crisis. Authorities are taking steps to stimulate demand in the sector without reigniting the property bubble. The crisis has already claimed property giant Evergrande, which is currently being liquidated. Another major developer, Country Garden, faces a liquidation petition in Hong Kong with a hearing scheduled for May.

While Beijing has previously signaled a willingness to let troubled companies fail, the timing of Ni’s comments is significant. Chinese leader Xi Jinping’s 2016 policy statement, “Houses are for living in, not speculation,” was absent from the draft government work report by Premier Li Qiang at the recent parliamentary session. This omission sparked speculation of a softening stance on debt control in the real estate sector. Ni’s remarks put those rumors to rest.

Ni acknowledged the ongoing challenges in stabilizing the market but pledged that Beijing will take “forceful” yet “orderly” measures to improve home sales. Analysts at Nomura, Jizhou Dong and Riley Jin, interpreted Ni’s statements as a sign that while local governments may have some policy flexibility, there’s no overall shift in China’s housing policy. “The government prioritizes ensuring completion of property projects, not protecting developers’ businesses,” they noted in a recent report. They view the overall tone on the property sector emerging from the parliamentary sessions as negative.