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July 19, 2017

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Property firms can use bonds for funds

CHINA has relaxed curbs on property firms seeking funds in offshore and onshore bond markets, people familiar with the matter say, a move that could allow fresh capital into a sector that has struggled to refinance after a slew of tightening measures.

Since late last year, regulators have made it harder for developers to sell onshore corporate bonds in a bid to help cool an overheating property market. Separately, the National Development and Reform Commission stopped granting new quotas for offshore dollar bond issuance in the second quarter of this year.

However, a bond underwriter told Reuters that the NDRC, the regulatory body that approves offshore corporate debt sales, in June lifted the curbs on offshore bond issuance by developers. A number of developers have already issued into the offshore market in recent weeks.

“There are no written words, but the message was communicated in meetings with officials. This way, policies can be flexible,” the underwriter said, declining to be named as he was not authorised to talk to the media.

Three developers told Reuters they can once again apply for onshore issuance with the China Securities Regulatory Commission, the agency responsible for onshore bond oversight.

New regulations governing many land auctions and setting limits on home prices in some mainland cities are threatening many developers' business models, which in turn is hurting their cashflow.

If liquidity stays tight, firms and analysts said the market might start to see bond defaults next year when many bonds reach maturity.


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