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Moody's Stays Negative About Development

MOODY'S Investors Service is maintaining a negative outlook for China's real estate development sector despite the recent rebound in the market.

The country's developers still face critical challenges in the near and medium-terms such as continued operating uncertainties, imminent refinancing risks and diminished balance-sheet liquidity, the ratings company said in its latest report.

"Property prices remain under pressure and inventories of unsold properties are still high so the recent improvement in sales volumes may not be sustainable," said Kaven Tsang, a Moody's analyst and one of the report's authors.

"Issuers' balance-sheet liquidity and financial profiles continue to be weak, particularly for those developers still exposed to some large land payments coming due this year."

With regard to servicing debts in 2009 and 2010, he noted that a number of rated property developers in China had higher refinancing needs, particularly for offshore debt.

While the government's loosening of credit improved onshore market liquidity, offshore sources of funds from international bond markets or foreign banks remain shut, the report said.


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