China offers another lifeline for cash-strapped developers as it allows them to tap equity financing

The CSRC’s measures to facilitate equity financing for Chinese developers applies to companies listed in mainland China and in Hong Kong

China introduced the equity refinancing rules in 2006, but suspended them in 2009 to cool galloping home prices

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Residential buildings under construction in Shanghai. Chinese authorities have stepped up measures to help distressed property developers. Photo: Reuters

Published: 12:08pm, 29 Nov 2022Updated: 4:47pm, 29 Nov 2022

China’s securities regulator said it will allow property developers to sell shares to raise funds, lifting a years long ban on equity refinancing as Beijing steps up support for the embattled sector.

The China Securities Regulatory Commission (CSRC) late on Monday rolled out five measures to facilitate equity financing for Chinese developers, including allowing mergers and acquisitions, restructuring and private share placements. The rules apply to companies listed on mainland Chinese markets and in Hong Kong.

The CSRC also said it will optimise real estate investment trusts to revitalise property assets and start a pilot programme for real estate private equity funds.

The move is a milestone, which will optimise the financing policies for the property sector, according to a report from China International Capital Corporation (CICC) on Tuesday. “The policy aims to revitalise the existing resources, avoid risks and stabilise the real estate market,” the report said.

The China Securities Regulatory Commission office in Beijing. The regulator has unveiled further measures to help property firms. Photo: Simon Song

It is the latest measure by Chinese authorities to alleviate the liquidity problems of indebted developers and follows a 16-point rescue plan for the sector jointly released by the People’s Bank of China and the China Banking and Insurance Regulatory Commission on November 11.

CICC said the so called “third arrow” to support equity financing, together with extending loans to property companies and allowing bond issuances, will ease the industry’s liquidity problems. This will boost market sentiment in the short term and promote stability of the market in the long run, the investment bank added.