China's securities regulator sketches future financing of property sector

China's top securities regulator unveiled a guideline on Friday to strengthen financial support for real estate enterprises as the property sector shifts toward a new development model.

The guideline, issued by the China Securities Regulatory Commission (CSRC), provides an overarching framework for property-related financing activities in the capital market. It seeks to improve financing arrangements involving shares, bonds, asset-backed securities (ABS) and real estate investment trusts (REITs) to meet the reasonable funding needs of developers.

The guideline is part of a broader package of measures concerning property sales and financing designed to accelerate the sector's transition, with a focus on further enriching financing channels beyond loans to capital market instruments.

The guideline calls for transforming property development financing from reliance on developers' creditworthiness toward a project-based approach. It states that reasonable financing needs of developers under all forms of ownership should receive equal treatment, while funds should support the development of quality homes that are safe, comfortable, green and smart.

According to the guideline, listed developers will be supported in raising funds through private placements of shares and convertible bonds, provided the proceeds are invested in market-based property projects that meet policy requirements. The CSRC will also continue handling registration filings for refinancing by overseas-listed Chinese developers.

The regulator will support listed developers in acquiring property-related assets through shares, privately placed convertible bonds or cash. Developers may issue new corporate bonds to support eligible real estate projects or roll over outstanding bonds.

To revitalize existing assets, the guideline encourages the issuance of commercial mortgage-backed securities and property-backed ABS based on projects with sound operations and stable cash flows. Eligible projects may also launch REITs or be injected into existing REITs through follow-on offerings.

Meanwhile, the CSRC said it would strengthen scrutiny of securities issuance, fund use and information disclosure, while cracking down on fraudulent issuance and false disclosures.

It will also seek to improve mechanisms for addressing bond defaults, oversee delisting cases involving listed property developers and work with local governments to resolve defaulted property bonds.