Half of China’s developers fall foul of Beijing’s three red lines

Almost half of China’s 30 biggest developers were in breach of at least one of Beijing’s recently introduced rules on property sector leverage. The “three red lines”, introduced last August to constrain developers’ debt, involve three metrics: the ratio of liabilities to assets; net debt to equity; and cash to short-term borrowing. Analysis by The FT, based on data from Beike Research, part of Chinese property group KE Holdings, showed that among the 30 developers, 14 had breached at least one red line as of 14 June. These companies accounted for the majority of the 30 developers’ sales last year. Only a few of the 30 developers in the FT analysis had violated two or more red line,s but liquidity crises at those companies, including Evergrande and Guangzhou R&F, have raised concerns about contagion to China’s wider economy. The FT (£)