China is urging large private and state-owned property companies to acquire real estate projects from troubled developers to reduce risks that mounting debt piles will destabilise the economy, the official China Securities Journal said on Monday.
The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) recently issued a notice to financial institutions, urging them to strengthen financial support for such acquisitions, the newspaper reported.
Over the past months, Chinese regulators have marginally eased funding curbs on the real estate sector, to prevent debt risks spreading from struggling developers including China Evergrande Group (3333.HK) and Kaisa Property Holdings (2168.HK).
Regulators are urging Chinese banks to actively provide lending to fund acquisitions of projects owned by cash-strapped developers, and avoid cutting, or withdrawing, loans to these companies, China Securities Journal reported.
But only the acquisition of real estate projects, rather than acquiring stakes in the struggling developers, would be encouraged, the newspaper said, citing unidentified sources.
Meanwhile, developers without financial problems are also being encouraged to issue bonds to fund such acquisitions, and PBOC is urging financial institutions to invest in such debt instruments, according to the newspaper.
Developers including China Merchants Shekou Industrial Zone Holdings Co (001979.SZ) plan to issue debt instruments via the interbank market in the near term to fund mergers and acquisitions, local media has reported.