After an unexpected default raised doubt on the market's integrity, Chinese officials have reminded developers they must complete all of their debt obligations, including offshore bond payments, according to people familiar with the matter.
Developers met in Beijing on Tuesday with officials from the National Development and Reform Commission and the State Administration of Foreign Exchange that they must make payments on time if at all possible, the people spoke on the condition of anonymity. According to the sources, any developer who is unable to satisfy their financial commitments must notify regulators.
The NDRC and the SAFE did not react to faxes seeking response right away.
As the property sector suffers escalating financial strains as a result of Beijing's deleveraging effort, offshore bondholders are growing concerned that they may be relegated to the bottom of the priority list for repayments. Investors were alarmed when Fantasia unexpectedly defaulted this month, despite the fact that the company had previously stated that it had ample working capital and no liquidity difficulties.
“This may be aimed at reassuring offshore bondholders that they will be treated fairly, alongside the onshore bondholders, "in an email, Wei Liang Chang, a macro strategist at DBS Bank, stated.
As defaults on offshore bonds by Chinese borrowers hit an annual high, regulators assembled a group of the country's largest and mid-sized developers this week. At the conference, the eight companies discussed their debts, refinancing, and payment schedules, according to the sources.