The exclusion of debt acquired from takeovers of distressed assets in calculating property developers’ compliance with China’s “three red lines,” is under discussion by Chinese policymakers, reports Reuters. The move, originally reported by REDD, a financial intelligence provider, comes after extreme stress on the sector and is aimed at encourage state-led M&A of struggling companies.
The “three red lines” policy restricts the amount of new borrowing property developers can raise each year by placing caps on their debt ratios.
Local governments including Shanghai and Guangdong held respective meetings with domestic state-owned developers last week, after policymakers asked the firms in mid-December to acquire assets from 11 private developers with liquidity issues to ease their financial stress.
