China’s Securities Regulator Unveils Five Measures to Support Capital Market Financing by Real Estate Enterprises

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The China Securities Regulatory Commission (CSRC) has announced the launch of a raft of measures to support capital market financing by Chinese real estate companies.

On 28 November, CSRC announced the launch of five “adjustment and optimisation measures” for equity financing by real estate companies that came into effect immediately.

The measures include:

  1. Restoring acquisitions and restructuring and accompanying financing by real-estate related listed companies. Qualified real estate enterprises may engage in restructuring listing, as long as the restructuring targets are listed companies in the real estate sector. Listed companies in the real estate sector are permitted to issue stocks or pay cash for the acquisition of real-estate related assets. When issuing stocks to purchase assets, the raising of ancillary funds is permitted, and funds raised can be used for existing real-estate related projects and transaction payments, as well as supplementation of liquidity and the repayment of bonds. Such funds cannot be used for land acquisition or development of new apartment projects.
  2. Restoration of refinancing by listed real estate companies and real estate-related listed companies. Listed companies are permitted to engage in re-financing via non-public methods. CSRC will guide the use of funds raised for real estate enterprises enjoying policy support, including real estate projects that guarantee the delivery of housing, as well as economic housing, and the development of relocation housing for shantytown upgrades or old town upgrades. Companies may also raise funds for supplementation of liquidity and repayment of bonds when they satisfy the requirements of refinancing policy. Other real estate-related listed companies that engage in refinancing must direct refinancing funds towards primary operations.
  3. Adjustment and improvement of policies for real estate enterprises to list in offshore markets. Restoration of refinancing by H-share listed companies, in order to maintain consistency with domestic A-share policy. Restoration of refinancing by H-share listed companies that are involved in real estate but whose main operations are not in the real-estate sector.
  4. Further making use of the role of REIT’s in revitalising the existing assets of real estate enterprises. Expanding work capacity in related areas, driving the normalised issuance of welfare rental housing REITs, striving to create a ‘welfare rental housing segment’ on the REIT market. Encouraging high-quality real estate enterprises to make use of assets including warehouse logistics and industrial parks for the issuance of infrastructure REITs, or expanding fund-raising assets for infrastructure REITs.
  5. Actively employing the role of private equity investment funds. Undertaking trials for immovable property private investment funds, and allowing qualified private equity fund managers to establish immovable property private investment funds. Guiding institutional funds to invest in existing residential real estate, commercial real estate and infrastructure, and expediting real estate enterprises to reinvigorate operational immovable property as well as explore new development models.

The move arrives just after China big state-owned banks entered cooperative agreements with some of the country’s largest real estate concerns, in a bid to help the sector overcome a recent spate of debt woes.

During the period from 23 to 24 November the big six Chinese banks signed a slew of strategic cooperative agreements with China’s leading real estate enterprises, to provide them with loans and other forms of financial support.