China’s developers are borrowing more to sate thirst for capital after flood gates opened

China’s property developers are borrowing more to finance their cash-starved operations, after the green light by the financial authorities and central bank opened the funding flood gate, in another sign of improving confidence in the beleaguered industry.

Bond financing in the property sector increased for the second month in October, rising 3.2 per cent from last year to 29 billion yuan (US$3.92 billion), according to data released on Tuesday by the China Index Academy.

The growth was partially due to last year’s low base, the research institute said, as October’s results was 32.4 per cent lower than the previous month. From January through October, bond financing in the property sector totalled 442 billion yuan, a decline of 25.6 per cent from the same period last year.

“The favourable policy environment has positively impacted financing for developers overall,” said Yan Yuejin, vice-president of the Shanghai-based E-House China Real Estate Research Institute. “This year’s measures to reduce funding costs, including reserve requirement cuts and initiatives encouraging banks to support developers, have benefited corporate financing to some extent.”

The latest data followed a series of stimulus measures unleashed by Beijing since late September to rescue the property sector and boost investor confidence in the world’s second-largest economy. These policies included cuts to down payments, mortgages, as well as an expanded white list qualifying developers for additional borrowing.

China’s legislative body, the National People’s Congress (NPC) Standing Committee, is holding a five-day session this week and is expected to discuss a larger fiscal package to further stimulate the economy.