CHINESE regulators want property developers to disclose details of rapidly growing commercial paper issuance in their monthly reports, said sources, as part of the government’s move to rein in ballooning debt in the property sector.

Real estate developers in the world’s second-largest economy are major issuers in the commercial paper market, which saw new issues worth 3.6 trillion yuan (US$556.00 billion) in 2020, up 20 percent from 2019.

Commercial paper, which is not counted as interest-bearing debt, is commonly used in the property sector as a payable that promises construction suppliers a payment on a future fixed date, usually within one year, though the suppliers sometimes sell the paper before maturity at a small discount in the secondary market.

Property developers, however, have increasingly used commercial paper to raise funds.

The regulators push for greater oversight comes amid rising late payments for these papers by firms including China Evergrande Group, China Fortune Land and Sichuan Languang Development.

It also comes as the government looks to tackle unbridled borrowing by developers outside the usual financing channels like bank loans and bond issuance to curb financial risk.

Regulators want more transparency, what developers are using the paper for and whether they are fully disclosing how much of these bills they hold, said a developer.

China’s property market has rebounded quickly from the COVID-19 shock, raising concerns about financial risks and overheating. Late last year, authorities began stepping up curbs on the sector, including restricting debt accumulation.

Twelve major developers have to disclose their debt position from channels including banks, debt markets and off-balance sheet projects every month to the regulators in a pilot program put in place by the central bank and housing authorities late last year, but that had not covered commercial paper.

Some developers issue the paper to associates and even shell firms, or issue multiple papers to a supplier against the same invoice, who then sell them directly in the secondary market and hand the cash back to the issuer, brokers said. (SD-Agencies)