In a move to reduce potential financial risks to its system, Chinese regulators announced tighter conditions on local developer offshore fund raising. Under the new rules, any new offshore bond issuance by real estate firms can only be used to replace medium to long term offshore debt maturing in the next year.

Our thoughts: Previously, developers were issuing offshore Dollar bonds at lower rates to fund various activities (e.g. repaying more expensive domestic debt, replenish working capital or acquire land). 1Q 2019 saw the issuance of US$47.1 billion in dollar-denominated bonds, up 4.8% year-on-year despite an active effort by authorities to slow bond issuance approvals. Expectations are for the latest measure to slow the country’s rising land prices as developers readjust their acquisition strategies.