China’s central bank and the insurance industry regulator have issued a notice to encourage financing for mergers and acquisitions in the real estate sector, the latest move to relax financing conditions for property developers, experts said.
The People’s Bank of China (PBC) and the China Banking and Insurance Regulatory Commission jointly called for banks and other financial institutions to provide funding and services for M&A deals involving major real estate enterprises to help them reduce liquidity risks, the Shanghai Security News reported on Monday.
The notice focused on encouraging high-quality real estate enterprises to merge with or acquire high-quality projects of vulnerable counterparts that have encountered operational difficulties.
The authorities also called for banks to strengthen support for bond issuance, provide M&A financing advisory services, improve the efficiency of M&A services, and establish a reporting system and publicity mechanism, according to the report.
The notice said that lenders should offer M&A financing in a managed and orderly manner, in accordance with the principles of legal compliance, controllable risks and sustainable business.
The move is aimed at downsizing poorly managed property companies that aren’t yet at the point of bankruptcy in a bid to resolve risks, the article said.
Relevant work is in progress. It is reported that the PBC and the State-owned Assets Supervision and Administration Commission (SASAC) held a meeting recently to guide high-quality enterprises to accelerate market-based M&As.
The PBC and CIRC also held a meeting to promote steady and orderly M&A lending by major banks. The agencies urged banks to avoid the practice of blindly withdrawing loans from large real estate enterprises that are facing risks and operating difficulties.
The encouragement of M&A deals is in line with an easing policy on the property industry to defuse the financial risks of real estate enterprises, Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Monday.
“Such policies have provided more financial support and a more relaxed environment for eligible enterprises to expand projects. By downsizing projects and speeding up their repayment of funds, it helps prevent deterioration in the operating conditions of problematic developers,” Yan said.
The policy is the latest sign that China is easing financing conditions for developers to restrict financial risks.
The National Association of Financial Market Institutional Investors (NAFMII) held a meeting with Chinese developers on December 10.
At the meeting, the NAFMII urged qualified developers to issue interbank bonds to finance completion of unfinished buildings, Shanghai Security News reported.
Analysts expect that with the monetary easing, the financial market will continue to widen funding channels for qualified property developers, meet their reasonable financing needs.
In the first 11 months, property investment expanded 6 percent year-on-year, compared with a 13.2-percent rise in the same period last year, according to data released by the National Bureau of Statistics.
A view from Taiyuan, North China’s Shanxi Province on Tuesday. New housing prices in four first-tier ities – Beijing, Shanghai and Guangzhou and Shenzhen in South China’s Guangdong Province – rose 0.6 percent month-on-month in January, the National Bureau of Statistics reported. Photo: cnsphoto
