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Chinese city Zhaoqing eases rules to support property developers' cashflow

HONG KONG : China's southern city of Zhaoqing said it will ease rules on property developers' escrow accounts and boost financial support to promote stable, healthy development of a debt-strapped sector that has been a key engine of the country's economic growth.

Analysts said the third-tier city in Guangdong province with a population of 4.1 million is the first in China to introduce guidelines specifically to help developers' liquidity, a move they said other cities may follow.

Despite repeated assurances by the Chinese policymakers and regulators to shore up the property sector, developers have said access to funding remained challenging, and many local government authorities were reluctant to ease rules.

In an official announcement this week, Zhaoqing's housing authority said local regulators should release funds "appropriately" from escrow accounts to developers facing a short-term liquidity crunch as a way to ensure they have sufficient capital to complete project construction.

It also said developers in stronger financial positions would be able to reduce the amount required for escrow accounts to ease funding pressures.

Echoing pledges by top policymakers, the city urged financial institutions to support the "reasonable" financing need of developers.

"We think these measures, if implemented, are helpful to developers especially that this is the first time that we see measures targeting ... problem developers," said CGS-CIMB Securities head of China research Raymond Cheng in a note. "We expect to see more local cities to follow suit."

So far this year, more than 100 cities have introduced regulatory easing measures as an effort to bolster the property market, but most of the measures focused on boosting home purchase demand via cuts in mortgage rates, smaller down-payments and subsidies.

Reuters reported early this year that China was drafting nationwide rules to make it easier for property developers to access pre-sale funds held in escrow accounts, correcting an "over-tightening" that had occurred at the city or county level.

Source: Reuters


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