China's central bank convened a virtual meeting to enhance its financial backing for affordable housing, aiming to expedite the sale of unsold housing stock as a looming property crisis threatens the growth of the world's second-largest economy.

Last month, the central bank introduced a 300 billion yuan ($41.4 billion) relending loan facility dedicated to affordable housing. This recent meeting, hosted from Jinan in Shandong province, underscores the central bank's efforts to promote this facility among local governments and banks.

In a strategic move, Beijing has authorized local state-owned enterprises (SOEs) to purchase unsold completed homes. The relending facility is designed to assist these SOEs in acquiring properties at "reasonable prices," facilitating a faster turnover of existing commercial housing stock in a market-oriented manner.

The People's Bank of China (PBOC) emphasized that the relending facility complements its "whitelist" mechanism introduced in January. This mechanism enables local governments to nominate housing projects, encouraging both state-owned and commercial banks to lend to developers. The PBOC stressed that SOEs' purchases should follow principles of "voluntary participation, demand-based ordering, and reasonable pricing" to maintain business sustainability and avoid the creation of new local hidden debt.

Officials from Jinan, Tianjin, Chongqing, and Zhengzhou shared insights from their local trial experiences during the meeting, which saw in-person attendance from PBOC Governor Pan Gongsheng and Deputy Governor Tao Ling.

Despite the central bank's efforts, analysts and developers caution that the $41 billion relending facility, potentially generating up to 500 billion yuan in bank financing for local SOEs, may have limited impact. The program's constrained size and potentially low purchase prices might not significantly aid cash-strapped developers, they argue.