China orders issuance of offshore loans to support real estate sector

China has ordered its four main state-owned banks to issue offshore loans to help property developers pay their overseas debts. This is Beijing’s latest support measure for the cash-strapped property sector.

Regulators have issued verbal instructions to banks, ordering them to issue loans backed by assets from developers by Dec. 10, two of the sources said, according to three sources at the Reuters news agency.

China has implemented many support measures to address the cash crisis strangling the property sector, which accounts for a quarter of the world’s second-largest economy and has been a key driver of growth.

Many promoters have not been able to pay their outstanding claims abroad in the past year and some analysts then warned that this could discourage foreign investors from responding to new debt issues by Chinese companies.

Funds obtained from loans from banks will allow developers to repay loans taken abroad and bonds issued in dollars, which should reassure investors, two of the sources told Reuters.

The initiators to “good quality” auditor, such as CIFI Holdings, Country Garden, Longfor Group, Midea Real Estate and Seazen Group will be eligible for the loans, one of the sources pointed out.

The four banks – Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China — will select the promoters they intend to fund, the three sources said.

Each bank will process three to four offshore loan proposals, which will be secured against the promoters’ assets in China, said two of the sources, according to whom this support program will later be extended to other banks.

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