THE feverish pace of onshore debt issues by Chinese property developers is set to slow amid signs that regulators are tightening issuance to control rising property prices.

    Underwriters said hardly any new developer bond applications were accepted in August in the stock exchange markets, following a flood of onshore deals totalling 1.1 trillion yuan (US$165 billion) in the past 16 months, according to Wind, a Chinese financial data provider.

    The stock market has become the predominant venue for developers to raise funds onshore. By contrast, the interbank bond market saw total issuance from developers of just around 200 billion yuan in the same period.

    Ma Jun, the central bank’s chief economist, told the China Business News in an interview that China should take steps to curb the flow of capital into the property market and state-owned companies to help slow the rise of debt levels in the economy, Reuters reported yesterday.

    “We should take a lot of measures to curb excessive bubbles in the real estate sector, curb the flow of excessive financial resources into the real estate sector,” Ma said.

    The pause comes after the China Securities Regulatory Commission (CSRC) announced restrictions on equity refinancings by listed property developers in late July that prevent using the proceeds to replenish capital, purchase land and repay bank loans.

    Market participants expect similar restrictions to be imposed on the sector’s bond issues, such as limits on the use of proceeds, to quell a jump in mainland property prices.

    S&P wrote last week that land prices had reached record highs in many tier-one and tier-two cities, as developers increasingly acquired land by buying smaller companies.

    “We believe the land-grabbing frenzy will hurt profitability and cash flows of more aggressive developers,” wrote S&P analyst Matthew Kong. “Any faltering in property prices could place those developers between a rock and a hard place.”

    A Shanghai-based underwriter at a mid-sized securities firm said he received guidance from the Shanghai Stock Exchange last week saying the bourse would not encourage developers to use the proceeds to purchase new land, particularly in third and fourth-tier cities.

    In the domestic market, Shanghai exchange and Shenzhen Stock Exchange oversee private placements of bonds, while public bond offerings are subject to CSRC approvals.(SD-Agencies)