China To Monitor Government-Funded Projects 24/7, Here's How

Monitoring equipment must now be installed at their projects by some Chinese developers, under official measures which took effect this month.

The rules are applicable to firms that have received at least 30 million yuan ($4.2m; £3.3m) of government funding.

This action is being taken as authorities move to support China's crisis-hit property industry. In January, it was announced by the country's housing ministry that more bailout loans would be offered to developers struggling with debt and a slowdown in demand.

China plans to monitor govt projects

The new surveillance rules were announced in January by the National Development and Reform Commission (NDRC), stating in a statement that the aim was to "regulate the implementation of projects and the use of funding".

"It is emphasized that these measures are important to strengthen investment supervision... and improve the effectiveness of government investment," it was added.

These rules are part of the Chinese government's efforts to ensure that "funds being used to prop up struggling property developers are being used for their intended purposes," as stated Ben Harburg from investment firm MSA Capital, reported BBC.

According to him, "Chinese developers have breached the trust of the Chinese government in the past by taking funds earmarked for completion of a project to pay off a coupon or even for personal use."

Under the measures, security devices - including surveillance cameras, drones, or even satellite equipment - must be utilized to monitor projects, if conditions allow. The people of China are considered to be some of the most surveilled citizens in the world. It has been estimated that half of the world's surveillance cameras are in China, amounting to hundreds of millions of devices. All of this is part of China's aim to build what is called "the world's biggest camera surveillance network."

Artificial intelligence, including facial recognition technology, is utilized by many of the cameras. However, the new rules are not perceived as "creepy, though there is an element of desperation," by David Goodman, a professor of Chinese politics at The University of Sydney, who added that some results may be positive towards ensuring performance and social achievement.

According to Mareike Ohlberg, a senior fellow at the think-tank German Marshall Fund of the United States, a move aimed at monitoring how public funds are spent is not expected to generate a lot of backlash, given the widespread surveillance across the country.

Other technologies like big data should be used by project developers to detect problems quickly, as recommended by the NDRC. Several major Chinese developers - including Evergrande, Country Garden, Sunac, and Longfor - were contacted by the BBC for comment. However, none have yet responded, as reported BBC

This week, severe problems engulfing China's property market were highlighted as a court in Hong Kong ordered the liquidation of debt-laden developer Evergrande. Evergrande, like many of its rivals, borrowed billions of dollars as it expanded aggressively. However, rules introduced in 2020 to control the amount large real estate firms could borrow helped trigger a crisis, which the industry is still struggling to overcome.

This presents a major issue for the Chinese government as the property sector accounts for roughly a quarter of the world's second-largest economy.

"The property sector is the bellwether for the Chinese economy. Provincial governments depended on the sector to drive employment and meet growth targets. It is critical that the Chinese government shore up this sector to diffuse some global fears," remarked Harburg.

China's Housing Ministry Announces Plans for Increased Bailout Loans to Developers Amid Financing Difficulties

Plans to offer more bailout loans to developers were announced earlier this year by China's housing ministry "in view of the current financing difficulties of some real estate projects". Simultaneously, local governments have been requested to provide a list of projects needing support, as reported by the official newspaper of China's housing ministry.

Urging banks to continue lending to struggling developers, Chinese lawmakers have highlighted the nearly 10 trillion yuan in loans provided to the property sector last year. In January, to support the economy, the largest cut to mandatory reserves for banks in over two years was made by China's central bank.

A day after the move, an "unshirkable responsibility" to property developers was emphasized by a senior official from the National Financial Regulatory Administration, Xiao Yuanqi, during a news conference in Beijing. Projects in difficulty, whose funds can be balanced, should receive greater support through extending existing loans, adjusting repayment arrangements, and adding new loans, according to Xiao Yuanqi.

Troubles in the property sector have also led to the prevention of project completion by developers, resulting in millions of vacant units scattered across the country. Many home buyers have been left waiting for their new properties due to the crisis, affecting economic growth and potentially the stability of the financial system, as highlighted by Ohlberg.

Beijing has previously sought to temper public concerns, as frustrations about developers have been shared on Chinese social media sites such as Weibo. Social stability is affected by housing, with a significant number of people buying properties that aren't built leading to widespread discontent, added Ohlberg.