As China's financial system approaches the "16th Five-Year Plan" period, it stands at a new historical juncture. The goal of "accelerating the building of a financial powerhouse" has been incorporated into the planning outline, emphasizing the development of the "Five Major Financial Areas" to support new quality productive forces and drive the leapfrog development of the real economy. The focus of the financial system's development is shifting towards higher quality and greater resilience.

Against this backdrop, Sina Finance has launched the "Financial New Voyage: New Engines, New Blueprints" series, inviting financial industry experts and scholars to conduct forward-looking discussions on financial reforms under the new cycle of the "16th Five-Year Plan." This edition features a dialogue with Lian Ping, Chairman of the China Chief Economists Forum and Dean & Chief Economist of the Guangkai Chief Industry Research Institute. He pointed out that real estate finance has entered a phase of structural and deep adjustment.

In January 2024, the Ministry of Housing and Urban-Rural Development and the National Financial Regulatory Administration jointly issued a notice on establishing a coordinated financing mechanism for urban real estate, supporting compliant real estate projects to enter a "whitelist" and guiding financial institutions to increase financing support.

Lian Ping believes the "whitelist" itself is an institutional arrangement that will continue to play a vital role. The scale of loans approved for "whitelist" projects has already exceeded 7 trillion yuan, which, at the current stage, maintains the basic foundation of bank lending to real estate enterprises.

The future improvement of real estate finance hinges critically on two aspects. First, whether market transactions can recover and demand can be effectively released, which is a prerequisite for the rebound in mortgage loans. Once the market shows relative improvement, mortgage loans are often the first to rebound, and quite noticeably. Second, as transactions improve, the operational conditions of real estate enterprises are expected to gradually repair, and financing forms such as development loans may also recover step by step. He stated that the future repair of real estate finance will be a process that progresses gradually in tandem with market fundamentals.

Real estate finance has entered a phase of structural and deep adjustment.

Sina Finance: The financial environment related to real estate has changed significantly over the past two years. Could you systematically discuss what stage real estate finance is currently in?

Lian Ping: Overall, real estate finance has entered a phase of structural and deep adjustment. In the past, real estate finance primarily relied on traditional financial models, such as residential mortgage loans and development loans issued by banks to real estate enterprises. Additionally, it included bond issuances by developers and some equity financing, but in terms of overall scale, mortgage loans and development loans dominated.

However, the current situation has changed markedly. On one hand, demand in the real estate market has significantly contracted, leading to a decline in transaction volume. The direct result of this transaction slump is a corresponding drop in the scale of mortgage loans. On the other hand, real estate enterprises themselves face considerable operational pressure, are generally adjusting their balance sheets, and show a clear lack of willingness to invest and increase leverage.

Sina Finance: In January 2024, a joint notice was issued to establish a coordinated financing mechanism, supporting compliant projects via a "whitelist" to guide increased financial support. How do you view the role played by the whitelist?

Lian Ping: The "whitelist" itself is an institutional arrangement that will continue to play an important role.

The latest data shows that the scale of loans approved for "whitelist" projects has exceeded 7 trillion yuan, largely replacing the traditional real estate enterprise loans as the new primary form of support. With the support of the "whitelist" system, the proportion of developer loans in bank credit is currently maintained at approximately 5%.

Without the advancement of this mechanism, commercial banks' credit allocation to real estate enterprises might have seen a significant contraction. It can be said that the "whitelist" mechanism, at this stage, sustains the basic foundation of bank lending to developers.

Looking ahead, the improvement of real estate finance still crucially depends on two factors. First, the recovery of market transactions and the effective release of demand, which is the prerequisite for a rebound in mortgage loans. Once the market shows relative improvement, mortgage loans are often the first to rebound noticeably. Second, with improved transactions, the operational conditions of real estate enterprises are expected to gradually repair, and financing forms like development loans may also recover step by step. The future repair of real estate finance will be a process that progresses gradually in linkage with market fundamentals.

Sina Finance: Will there be new changes in the models of financial support for the real estate industry in the future?

Lian Ping: Traditional financing methods will still exist, including bank credit, bond issuance, and equity financing, but the structure will change.

The growth rate of development loans is unlikely to return to the high levels of the past. In contrast, direct financing methods for real estate enterprises, such as bond issuance and equity financing, may have greater room for development. For banks, the traditional indirect financing model has already accumulated considerable risks, and they will be more cautious in the future; the possibility of its proportion increasing significantly again is not high.

From the perspective of risk dispersion and control, direct financing, where risks are shared by social investors, is relatively more reasonable. In the future, the real estate financial system is likely to exhibit a landscape where the proportion of direct financing increases, while indirect financing is maintained but does not expand rapidly.

Fine-tuning of interest rates and interest subsidy policies are the likely focal points for subsequent policies.

Sina Finance: What other policy tools in the toolkit can play a role in supporting real estate?

Lian Ping: From the perspective of policy tools, there is still some room for adjustment, but overall, it is in a relatively late stage. Loan interest rates have already undergone a significant round of reductions. The market is now watching for new policy tools, such as whether fiscal interest subsidies will be used to further lower financing costs. That is to say, the room for substantial adjustments at the nominal interest rate level may be limited, but policies where the fiscal authority subsidizes part of the interest to actually reduce the financing burden for enterprises and homebuyers are still under consideration.

Furthermore, provident fund loan interest rates have already fallen to relatively low levels, and the scale of provident fund usage is expanding. Overall, the application of traditional policy tools has been quite extensive. Subsequent policies are more likely to manifest as structural optimizations and marginal adjustments, primarily focused on fine-tuning interest rates and interest subsidy policies.

Sina Finance: What are the possibilities of RRR and interest rate cuts this year, and what practical constraints does the central bank face in its interest rate policy choices?

Lian Ping: The possibility of interest rate cuts still exists this year. However, currently, bank deposits are growing, but loan issuance is significantly insufficient, with many banks having funds they "cannot deploy." Under these circumstances, even if the RRR is further cut, increasing the funds available to banks, the policy effect would be greatly diminished due to the lack of loan demand.

Therefore, I believe the central bank is more inclined to observe for a period, waiting for an improvement in the real economy and credit demand. Once loan growth picks up, the space and pace for subsequent policy operations will become more manageable.

It must be noted that interest rate cuts put significant pressure on banks. With weak credit demand, the traditional profit model banks rely on is under pressure. As interest rates decline, banks' net interest margins continue to narrow; the industry average net interest margin had fallen to about 1.42% by the end of the third quarter of 2025. Further compression of interest margins would significantly increase the operational pressure on banks.

Simultaneously, the non-performing loan ratios for both mortgage loans and development loans are rising. Writing off NPLs requires real money, especially at year-end when banks often need to use profits to dispose of non-performing assets to stabilize NPL ratios. If not handled promptly, rising NPL ratios could lead to rating downgrades for banks, with some small and medium-sized banks even facing financing difficulties. Therefore, the central bank's caution regarding interest rate policy is a rational choice.

Additionally, the external environment must be considered. If the US continues to cut rates subsequently, China's monetary policy would indeed have some room to follow, but the overall magnitude would not be large. Ultimately, the key factor constraining the space for monetary policy currently lies not with the central bank, but with the banking system's own capacity to withstand pressure.

The signal for recovery will come from stabilizing prices in first-tier cities.

Sina Finance: From your observation, where is the most critical "bottleneck" that needs to be unclogged in the current real estate market?

Lian Ping: The core bottleneck remains whether transactions can recover. Behind transactions lies the essential release of housing demand. After approximately five years of market downturn, I believe the issue is not a lack of demand, but rather that the market is in a clear wait-and-see mode. Many potential homebuyers are hesitating, questioning whether it's the right time to buy now or if they can wait for even lower prices.

To break this stalemate, the market needs a clear and strong signal that creates a consensus among buyers that if they don't enter the market now, they might miss relatively low prices. This signal often comes from first-tier cities. When prices in first-tier cities stabilize first and begin to rise, those who originally had plans to buy will significantly accelerate their decision-making, transaction volumes will subsequently amplify, and market activity will quickly increase.

When transactions continue to amplify and prices start to rise, the market "bottom" is basically being confirmed step by step. Once such expectations are formed, the possibility of prices falling significantly again is markedly reduced.

Sina Finance: How can one judge whether such a price increase is a genuine trend-driven recovery, rather than a brief rebound followed by another decline?

Lian Ping: The key is still to see whether transaction volumes can sustain their growth. Price increases without the support of transactions are inevitably short-lived. Only when transaction volumes continue to expand, leading to mild and stable price increases, can it be considered a healthy market recovery.

The real estate market and the stock market are similar in this aspect, both characterized by "buying on the rise, not on the fall." However, the difference is that once real estate prices move away from a certain range, it is often difficult for them to return to their original level in the short term. From a cyclical perspective, China's real estate market has undergone roughly five years of adjustment. There might still be a one-to-two-year bottoming process ahead, but I believe the extent and duration of this process will not be very long, potentially gradually ending this year or next.

Sina Finance: Many people compare the current adjustment phase of China's real estate market with those experienced by Japan and South Korea in the past. How do you view this analogy?

Lian Ping: The fundamentals of China's real estate market are not entirely identical to those of Japan and South Korea back then. When the real estate bubbles burst in Japan and South Korea, the bubbles themselves were large, and the urbanization rate had already exceeded 80%, essentially exhausting the demand momentum brought by urbanization.

In China, however, whether calculated by household registration or resident population, there is still room for the urbanization rate to increase. More importantly, China is entering a new stage of development characterized by the agglomeration of high-tech industries. Regions like the Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, Beijing-Tianjin-Hebei, as well as key cities like Xi'an and Chengdu, are experiencing rapid development in high-tech industries, which in turn drives continuous population inflow. Industrial development not only attracts high-end talent but also brings in mid-to-low-end service and supporting populations, thereby creating new housing demand. The future growth of real estate demand in China will be more reflected as structural and regional growth.

Text | Sina Finance, Feng Saiqi