21 Dec 2021

(Yicai Global) Dec. 21 — Chinese authorities are calling on lenders to support mergers and acquisitions in the real estate sector to ease the financing difficulties of property developers.

The banking sector must enhance support for bond financing, offer consulting services for M&A financing, improve services for M&A businesses, conduct risk management and set up feedback systems, the People’s Bank of China and the China Banking and Insurance Regulatory Commission said yesterday.

M&As can help bail out struggling real estate projects, such as those that are likely to be abandoned, but do not touch the equity of the developer, said Yan Yuejin, head of research at think tank Shanghai E-House Real Estate Research Institute.

Lenders’ support in project selection, fundraising and risk management will help project buyers control M&A risks, Ping An Securities said. Large private and state-owned enterprises in particular are expected to take advantage of the new policies.

In a recent meeting with the PBOC, CBIRC and State-owned Assets Supervision and Administration Commission, banks were told not to blindly demand repayment or cut off loans to large real estate firms that are experiencing financial difficulties, to encourage the acquisition of flailing real estate projects and to better support developers’ financing needs.

By boosting liquidity, the real estate sector is likely to see a wave of M&As, industry insiders said. In the second half there were very few acquisitions as developers had no extra cash. Country Garden, one of China’s leading real estate companies, has not carried out any sales or acquisitions of projects worth more than CNY200 million (USD31.4 million) in the last six months, the Foshan, Guangdong province-based firm’s property management subsidiary said last week.

Editor: Kim Taylor