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China loosens developers' financing rules

Mainland permits two property companies to raise money through private placement

Zhang Hong

The mainland further loosened its grip on the financing of property companies yesterday by allowing two more firms to raise funds through private placement.

Shanghai-listed Join In said it had won formal approval to raise about 1.7 billion yuan (HK$2.1 billion) through private placement by issuing up to 180 million shares.

Shenzhen-listed Tianjin Tianbao Infrastructure was granted approval to raise 1.55 billion yuan by issuing up to 346 million non-public shares.

Both companies' shares rose by the daily limit of 10 per cent, with Join In closing at 13 yuan and Tianjin Tianbao Infrastructure at 5.74 yuan.

[Beijing is] aware that curbing financing … won’t help cap the housing price
GARY LIU, CEIBS LUJIAZUI INSTITUTE

Analysts said the move marked a significant loosening of regulations on the financing of property firms, which had been almost at a standstill since 2010.

In January, Guangdong Highsun, a Shenzhen-listed commercial property developer, received regulatory approval to raise 834 million yuan through a private placement, becoming the first mainland developer to access the onshore stock market after a four-year suspension.

Gary Liu Shengjun, executive deputy director of CEIBS Lujiazui Institute of International Finance, said many property companies were operating under tight liquidity conditions.

Unable to raise money from stock markets or to obtain loans from banks, "some of them have had to borrow money from private investors at much higher interest rates", he said.

Beijing has vowed to rely more on the market to allocate resources, which means less intervention.

For the first time in eight years, no specific commitment to "regulate property prices" or "regulate the property market" was contained in the government work report delivered by Premier Li Keqiang at the opening of the annual session of the National People's Congress this month.

"The central government is now aware that curbing financing to property markets won't help cap the housing price," Liu said.

This article appeared in the South China Morning Post print edition as: Financing rules of developers loosened
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