China's real estate is recovering from a slump caused by a campaign to reduce the sector's debt levels, the vice-president of the Chinese central bank said today, after a wave of defaults.

Pan Gongsheng mentioned Evergrande Group, the world's most indebted construction company, but offered no details on the company's efforts to restructure 2.1 trillion yuan (almost 300 billion euros) in debts with banks and bondholders.

"Market confidence is recovering. The number of transactions in the real estate market has increased," Pan said at a press conference on the eve of the start of the annual session of the National People's Assembly, China's top legislative body.

"The financing environment, especially for high-quality developments, has improved significantly," said the same source quoted by Lusa.

Pan gave no indication as to whether Beijing plans to make significant changes to the campaign to reduce the level of debt of companies in the sector. In 2021, Chinese regulators began requiring construction companies to have a 70% ceiling on the ratio of liabilities to assets and a 100% limit on net debt to assets, sparking a liquidity crisis in the sector, which has been exacerbated by measures to combat covid-19.

Some construction companies went bankrupt. Others were unable to pay the interest on bonds issued on the domestic and foreign markets.

Evergrande said it has 2.3 trillion yuan (around 320 billion euros) in assets, but is having trouble converting them into cash to pay creditors.

Local governments have taken over some unfinished projects to ensure that families will receive the apartments that have already been paid for.

In the last quarter of 2022, bond issuance by Chinese construction companies rose 22% year-on-year to 120 billion yuan (16.4 billion euros), according to Pan. The official said that bank loans for real estate had also increased.

The president of the central bank, Yi Gang, said that Beijing plans to keep the exchange rate of the Chinese currency stable, after it fell to a 14-year low against the US dollar in September.

The exchange rate "will basically remain stable at a reasonable and balanced level," said Yi Gang at the same press conference.

The central bank intervened to prevent the yuan from falling after the US Federal Reserve raised interest rates to combat inflation.

Rising interest rates make it more profitable to keep savings in dollars, which is causing a flight of capital from China.

The exchange rate could face more pressure as rising interest rates in the US are expected to curb inflation and economic activity, while Beijing is relaxing controls on credit to stimulate economic growth.

A weaker yuan helps Chinese exporters make their products cheaper for foreign buyers, but encourages the flow of capital abroad. This increases the cost of credit in China.