China limits bond issuance by property firms - newspaper

People ride electric bikes as they pass next to property condeminiums (back) in Zhengzhou on October 19, 2016. China's growth slipped to a seven-year low of 6.6 percent in the third quarter, according to an AFP survey, despite ample stimulus and a red-hot property market in the world's second-largest economy. / AFP PHOTO / NICOLAS ASFOURI

BEIJING: China’s property developers will not be allowed to issue bonds to raise money for land purchases, a Chinese newspaper reported on Friday, in an attempt to cool a property frenzy in the world’s second-largest economy.

The Shanghai Stock Exchange has issued a letter to bond underwriters to thoroughly investigate how property developers would use funds raised on bond issuance, the 21st Century Business Herald said, citing sources.

Bond issuers would have to agree in writing they would not use funds to purchase land and regulatory organisations would follow up to ensure the issuers carried through with the agreement, the newspaper said.

The letter also outlines tightened restrictions for bond issuance by companies in industries experiencing overcapacity, such as coal and steel, the newspaper said.

Earlier this month, brokers and developers told Reuters that China is making it harder for real estate developers to sell bonds. The aim is to cut down a source of liquidity that has helped drive property prices to dizzying heights. - Reuters