The committee was established by the People's Bank of China (PBOC), according to SCMP. However, details about the new organization were not disclosed.

The new financial committee aims to mitigate China's growing debt risks. It was formed after Yin Zhongli, a State Council advisor, proposed that Beijing inject 1 trillion yuan (139 billion USD) into the real estate sector. According to Yin, this move would help stabilize the balance sheets of real estate developers.

Yin Zhongli's proposal comes as Beijing continues to grapple with a 4-year real estate crisis triggered by the Evergrande Group's default in mid-2021. Yin, a senior real estate finance expert at the Chinese Academy of Social Sciences, warned that real estate developers are still burdened by debt, despite recent sales increases. He suggested that the government should take stronger action to help developers liquidate their assets.

"As these companies are facing a major cash flow shortage, I propose establishing a dedicated state-backed agency to provide capital to real estate developers that meet certain criteria," he wrote in a magazine in July.

He proposed that the Ministry of Finance should fund the capital by issuing special bonds, suggesting the establishment of a 1 trillion yuan real estate stabilization trust fund for eligible real estate businesses. He also suggested that the money should be transferred to some or all of China's 30 largest private real estate companies. The government could purchase convertible preferred stock from these businesses with a term of 5 years or more.

Following Evergrande's collapse in 2021, the real estate market plunged into a prolonged crisis, leading to declines in construction, sales, and housing prices. Beijing has implemented various measures to rescue the market, including efforts to coordinate the completion of unfinished homes, provide liquidity support, and ease home purchase restrictions to boost sales.

The real estate sector remains a major financial risk for China, with debt levels accounting for the highest proportion in the banking system. The non-performing loan ratio for real estate loans at the country's major banks at the end of last year remained almost unchanged compared to 2023.

The non-performing real estate loan ratio at the Agricultural Bank of China is 5.4%, China Merchant Bank 4.94%, and Bank of Communications 4.85%. Meanwhile, according to the China Banking and Insurance Regulatory Commission, the average non-performing loan ratio for the entire banking industry in March was 1.51%.

Tu Anh (SCMP)