(Yicai) Jan. 31 -- China has started its so-called whitelist property financing program, by sending the names of the first recommended projects still under development to banks yesterday in an effort to match loans with cash-strapped projects.

The first batch of names included 107 projects in Guangxi Zhuang Autonomous Region and 314 in Chongqing. The names were collected and examined by the local governments and the whitelists sent to about 50 banks for consideration, with the first loan already made to a project in Nanning, the capital of Guangxi, according to a Securities Times report.

China created the whitelist program at the start of the year when a policy document was issued by the housing ministry. The document asked provincial-level governments to prepare lists and recommend projects to local banks for financing, with the banks making their own decisions after assessing the risks independently.

After a developer puts itself forward for inclusion, the local government screens it. Lenders can opt out based on their own independent evaluation, Yicai learned from market insiders. As of now, most whitelists are still in the process of reporting or reviewing. 

The move to target specific projects makes policy support more precise and the quick adoption should boost market confidence, Liu Shui, director of enterprise research at the China Index Academy, told Yicai.

Developers tend to set up project companies for specific housing projects, and there is difference in risk profile for the parent company and the project firm, so lending to the project instead of to the parent, as is usual, can completely isolate the risk from the parent, Liu said.

The manager in charge of a bank’s regional branch in central China said that offering loans for specific projects should be safer for lenders in the current market environment as it makes gauging risk easier.

But the market does not have many high-quality projects at the moment and the whitelists are just for banks' reference, the executive said. Lenders will not lower their risk control requirements and they will seek to ensure that the funds will not be allocated elsewhere, he added.

Editors: Tang Shihua, Emmi Laine