China can now monitor government-funded projects 24/7

Official measures that took effect this month require some Chinese developers to install monitoring equipment on their projects.

The rules apply to companies that receive government funding of at least 30 million yuan ($4.2 million, £3.3 million).

The move comes as authorities move to support China’s crisis-hit real estate industry.

The country’s housing ministry announced in January that it would provide additional relief loans to developers struggling with debt and weak demand.

The National Development and Reform Commission (NDRC), which announced new oversight rules in January, said in a statement that it was moving toward “regulating the implementation of projects and the use of funds.”

“These measures are important to strengthen investment supervision and improve the effectiveness of government investments,” it added.

Ben Harburg of investment firm MSA Capital told the BBC that the rules would ensure that “money being used to support struggling property developers is used for its intended purpose”. He said it was part of the government’s efforts.

“Chinese developers have betrayed the trust of the Chinese government in the past by using funds earmarked for project completion to pay off coupons or for personal use,” he said. .

The measures require the use of security equipment such as surveillance cameras, drones and even satellite equipment to monitor the project, if conditions permit.

Chinese citizens are among the most surveilled citizens in the world. It is estimated that half of the world’s surveillance cameras are in China, numbering in the hundreds of millions.

All of this is part of China’s goal to build what it calls “the world’s largest camera surveillance network.”

Many of the cameras use artificial intelligence, including facial recognition technology.

But David Goodman, a professor of Chinese politics at the University of Sydney, said he didn’t think the new rules by authorities overseeing state-sponsored projects were “desperate, but not creepy”.

“There are likely to be some outcomes, some of which may be positive for securing business performance and social outcomes,” he added.

Mareike Ohlberg, a senior fellow at the German Marshall Fund, a US think tank, said: “Moves aimed at monitoring how public funds are spent and generating a lot of backlash are unlikely, at least in theory. I don’t have high expectations.” Given the “widespread surveillance across the country.”

According to the NDRC, project developers should also use other technologies such as big data to quickly detect problems.

The BBC has contacted several major Chinese developers for comment, including Evergrande, Country Garden, Sunac and Longfor. No one has responded yet.

Evergrande, like many of its rivals, borrowed billions of dollars as it aggressively expanded its business.

However, in 2020, rules were introduced regulating the amount that major real estate companies can borrow. This contributed to the crisis, which the industry is still struggling to overcome.

This is a big problem for the Chinese government, as the real estate sector accounts for about a quarter of the world’s second-largest economy.

“The real estate sector is a bellwether for China’s economy. Local governments relied on this sector to foster employment and achieve growth goals. To alleviate some of the global concerns, It is important that the Chinese government strengthens this sector.”

Earlier this year, China’s Ministry of Housing announced plans to provide more relief loans to developers “in view of the current financing difficulties for some real estate projects.”

At the same time, local governments are asked to provide a list of projects that require support, the official gazette of China’s Ministry of Housing reported.

Chinese lawmakers also called on banks, which provided about 10 trillion yuan in loans to the real estate sector last year, to continue lending to struggling developers.

In January, the People’s Bank of China cut mandatory reserves for banks by the most in more than two years to free up funds to support the economy.

The move came a day after a senior government official said the financial industry had an “inescapable responsibility” to property developers.

“For projects that are in difficulty but can balance their finances, we should not blindly withdraw loans, restrict financing, or reduce financing,” Xiao Yuanchi of the National Financial Supervisory Administration said at a press conference in Beijing. It should not be canceled.”

“We should provide greater support, including by extending existing loans, adjusting repayment plans, and adding new loans.”

There are also problems in the real estate sector, with developers unable to complete projects and millions of vacant properties dotting the country.

“This could have an impact on economic growth and potentially on the stability of the financial system,” Ohlberg said.

The Chinese government has previously sought to allay public concerns as people share their frustrations with developers on Chinese social media sites such as Weibo.

“Housing affects social stability. If many people buy properties that have not been built, many people will be very upset,” she added.