BEIJING: Chinese banks are facing growing pressure to support cash-strapped developers after months of pleas by regulators failed to boost lending to the industry.

       Local branches at the People’s Bank of China (PBoC) have called for meetings with banks in multiple cities since last week to assess why loans have slowed, along with the difficulties faced by banks and how regulators can help, according to people with knowledge of the matter.

       The move represents increasing concern from officials following repeated so-called window guidance for faster property lending in previous months, the people said, asking not to be identified discussing private information.

       Builders and regulators are counting on banks to provide a lifeline to the industry as bond funding and home sales dry up.

       Yet developers’ cashflows from bank loans have plunged almost 30% in recent months, undermining President Xi Jinping’s efforts to arrest a property slump that’s worsening a slowdown in the world’s second-largest economy.

       As the number of developers that have defaulted on or extended debt obligations mounts, banks are reluctant to increase their exposure to the sector in response to regulators’ demands.

       Some are only rolling over debt to prevent a souring of loans, the people said. China’s widening crackdown on corruption in the financial system has added to bankers’ reticence.

       Regulators stopped short of imposing any punishment on banks that fail to boost lending, said the people.

       The dearth of lending isn’t entirely a supply issue: the risk of weak sales has also made some private builders reluctant to borrow for new housing projects, the people added. And the housing slump is weighing on demand for mortgages even as interest rates fall.

       The PBoC didn’t immediately respond to a faxed request for comment.

       “Whichever bank provides a lifeline to a developer will have to shoulder the risk, and why would a developer take on more debt without seeing better sales prospects?” said Shen Meng, a director at Beijing-based boutique investment bank Chanson & Co.

       “Without enough home-buying demand, it’d be a dead end for either banks or developers.”

       From easing mortgage costs to relaxing ownership rules, China has stepped up efforts to salvage the US$2.4 trillion (RM10.5 trillion) market for new homes that has seen prices fall for eight months and more than a dozen real estate companies default.

       These measures have yet to bear fruit. Developers’ cash inflow from banks shrank almost 30% in March and April from a year earlier, exacerbating their liquidity crunch, statistics bureau data show.

       Home sales by the nation’s top 100 developers plummeted 59% in May from a year earlier. Household mortgages shrank by 60.5 billion yuan (RM40bil) in April from a month earlier, according to central bank figures. — Bloomberg