Chinese property developers are no longer required to report monthly data related to the country’s “three red lines” policy, local media reported on Thursday, an apparent end to rules which triggered a major debt crisis that continues to this day.
Shares in several real estate developers surged on the news, with Logan Group soaring as much as 40 percent, while those of China Aoyuan jumped more than 30 percent.
The “three red lines” refer to caps for debt-to-cash, debt-to-assets and debt-to-equity ratios that Chinese authorities imposed in 2020 on developers for obtaining new lending.
The idea was to rein in the sector’s appetite for unbridled borrowing, but it backfired spectacularly by causing a liquidity crunch and many developers have since defaulted on their debt. That in turn has hit the Chinese economy hard with home buyer and investor confidence slumping as swathes of apartments went unfinished.
China Real Estate Business, a media outlet managed by the Ministry of Housing and Urban-Rural Development, reported that the “three red lines” policy has basically ended.
A spokesperson for the ministry could not immediately be reached for comment.
The CSI 300 Real Estate Index in mainland China climbed 5 percent on Thursday to its highest level in two months, while the Hang Seng Mainland Properties Index gained 4 percent. The broader market was flat.
Chinese authorities have over the years taken a raft of measures aimed at supporting the property market, but new home prices extended declines in December, underscoring persistent strains in the sector.
Reuters
