Chinese developers sell fewer offshore bonds in tightening drive

Chinese developers sold fewer offshore dollar bonds in the second quarter, retracting from the strong start at the beginning of the year, as Beijing tightens the liquidity of real estate firms to curb rising home prices.

Developers issued nine US dollar-denominated bonds totalling US$2.9 billion from April 1 to June 15 period which was less than a third of the US$10.1 billion that was raised in the first quarter and a 61 per cent decline from the 23 deals.

The abrupt slow down is largely due to the government’s accelerated tightening to cool the overheated housing market.

China’s National Development and Reform Commission (NDRC), which approves corporate debt issuance, has virtually stopped granting new quotas for offshore bond sales since April this year, Reuters has reported earlier.

“The policy is intended to avoid the excess capital flowing to the land market and pushing up land prices, thereby control runaway home prices,” said David Ng, Macquarie’s head of China & Hong Kong research.

“But I’m worried if it [would] instead result in reduced land supply, which will in the end drive prices up.”