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What China’s Three Red Lines Mean for Property Firms

china homes real estate property
Photographer: Qilai Shen/Bloomberg
Updated on

In a bid to curtail China’s freewheeling real estate sector, policy makers introduced debt metrics in 2020 that set limits for developers seeking to borrow more. Called the “three red lines” by state-run media, they have become a game-changer for an industry that accounts for about a quarter of economic output. But with more and more real estate companies now sinking into a worrying liquidity crisis, regulators are now tweaking the rules to engineer a soft landing.

Developers wanting to refinance are being assessed against three thresholds: