China’s stricken property market gets a boost as government is set to guarantee bonds of some private developers

China’s government has instructed a state-owned credit enhancement company to provide guarantees to a number of private property developers issuing bonds, giving them a leg-up to raise capital during a debt crisis that has hobbled the industry for the last year.

First up is Chongqing Longfor Corporate Expansion Limited, a unit of Longfor Group Holdings, which will issue yuan-denominated notes worth between 1 billion yuan (US$147 million) and 1.7 billion yuan on August 24, according to a term sheet seen by the South China Morning Post.

The full amount of the bond will have “unconditional, irrevocable joint-liability guarantees” from state-owned China Bond Issuance, the country’s first professional credit enhancement institution, established in 2009, according to the term sheet.

Several other property companies, including Country Garden Holdings and Cifi Holdings, will also be supported by the guarantees for their onshore bond sales, which are expected soon, according to sources. Sino-Ocean Group, Seazen Holdings and Gemdale Corporation are also likely to be among them, the sources said.

The fresh state support is seen as an upgrade from previous measures to boost investor confidence in the onshore bonds of home builders in China’s troubled US$2.7 trillion property market.