Mainland Chinese property shares surge on rumours authorities will back ‘financially healthy’ developers

The Shanghai Stock Exchange Property Index jumped 3.5 per cent, while developers and suppliers rallied in Shenzhen
Rumours online said the government is planning to offer support to developers with healthy balance sheets

China property

Yulu Ao

Published: 6:28pm, 4 Jan 2023

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Shares of mainland Chinese property developers surged on Wednesday as rumours emerged that the authorities are planning a raft of supportive measures for financially stable home builders.

The Shanghai Stock Exchange Property Index jumped 3.5 per cent, while developers and suppliers rallied in Shenzhen.

The rumours circulating online said the Chinese government is planning to offer support to developers that have weathered the debt crisis rocking the industry and emerged with healthy balance sheets.

Meanwhile, Bloomberg News reported that the authorities are drawing up a shortlist of financially sound developers to receive the benefits. They will have to fulfil requirements such as showing auditing reviews to prove their financial statements are reliable and that they have no major defaults on record.

The eligible developers on the list may benefit from several preferential measures covering equity financing and loans, as well as real estate investment trusts and acquisitions, Bloomberg reported.

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The rumour comes a couple of weeks after Yi Huiman, chairman of the China Securities Regulatory Commission, pledged to stabilise the real estate market and support “good-quality developers” by improving their balance sheets.

“We shall keep an eye on the challenges that China’s property sector is facing now,” he said during a meeting on December 21.

The Financial Stability and Development Committee, the People’s Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission are the agencies behind the plan, according to the rumours online and the Bloomberg report.

None of them has yet responded to requests for comment from the Post.

“The plan, if confirmed, means the authorities will further expand their ways of supporting developers after the ‘three arrow’ rescue policies in November,” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution.

China’s top regulators fired “three arrows” – bank credit, bond issuance and equity financing – within 20 days in November to crack the ice that had chilled the real estate industry.

Yan said the requirement for the developers to have a healthy balance sheet means the authorities are keeping their exposure to risk to a minimum.

Yan said the idea of helping to improve developers’ balance sheets had been touted and reiterated in various meetings held by the Chinese authorities in recent months. The latest was the Central Economic Work Conference in mid-December, which urged local governments to outline measures to meet the “reasonable financing demands” of property companies.

One day earlier, the Chinese central bank’s branch in Guangzhou issued guidance for local financial institutes to service eligible developers in southern Guangdong province with credit and loans to ease their offshore debt, which amounts to 2.8 billion yuan (US$410 million) in total.

It will expand the support to more Guangdong-based developers as a next step, the branch said.

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