Small, mid-sized Chinese developers still facing funding woes
Regulators now encouraging non-financial institutions to steer clear of debt-based lending to developers, and move towards equity investment
The funding strain on Chinese developers continues, say analysts, after a string of further financial curbs on their borrowing were introduced since the turn of the year in an effort to cool property prices and cut the risk of growing debt levels.
However, the fallout has been uneven, with major national developers remaining relatively unscathed while medium and small-size developers are being hit hard, which could lead to further consolidation in the industry.
“Smaller developers are facing greater pressure to improve cash flow, and to sell their housing projects, or majority stakes in them, to bigger rivals,” said Xu Chao, property analyst with Tianfeng Securities. “That is actually a positive development, for the bigger listed developers.”
The latest moves saw China’s securities regulator, in January, banning non-banking financial institutions from channelling funds into the property sector via entrusted loans and trust loans.
And there was a clampdown on lending by the shadow-banking sector, which had effectively funded many of the excessive land purchases over the past two years, which helped fuel the spectacular surge in property prices in the first place.