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China curbs developers' funding to cool market

Beijing

CHINESE authorities are taking fresh steps to cool the property market, curtailing onshore fundraising for developers found to have bid aggressively in land auctions.

The curbs have affected companies including Sunac China Holdings Ltd and Gemdale Corp, said people with knowledge of the matter, who asked not to be named.

In some cases, developers' underwriters were asked by regulators not to tap unused quotas for selling yuan bonds or asset-backed securities, according to the people. Cifi Holdings Group Co, Risesun Real Estate Development Co and Country Garden Holdings Co are also among those impacted, the people said.

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Regulators' actions were primarily driven by the view that the developers had been aggressive in bidding for land plots in some cities, one person said. By targeting developers' financing plans, authorities signal they are willing to use a wide range of levers for keeping the housing market in check, in addition to more blunt tools such as outright price curbs.

The Ministry of Housing and Urban-Rural Development has issued warnings to local governments in cities with big fluctuations in home and land prices, and regulators have rejected several developers' applications for offshore bond sales since April.

Chinese developers have raised a combined 345 billion yuan (S$68 billion) this year selling onshore bonds and asset-backed securities, data compiled by Bloomberg and China Securitization Analytics show.

A representative for Cifi said the company's capital markets business is operating as usual and that it "maintains a prudent investment strategy". Gemdale said its operations are normal.

A Sunac representative had no comment, while Country Garden didn't immediately respond to calls. Phone calls to Risesun's offices went unanswered. Price gains have been especially pronounced in so-called tier-2 cities (generally defined as provincial capitals and regional economic hubs like Hangzhou on China's east coast and Wuhan in central Hubei province), where they rose in April at the fastest pace this year compared with the prior month.

Developers have increasingly been flocking to mid-tier cities because they are emerging as potential winners from China's urbanisation strategy.

Price gains in bigger hubs are still being damped by buying curbs and limited land supply, while smaller markets have been dented by a reduction in funding for shanty-town redevelopment projects. BLOOMBERG