Three red lines

The three red lines (Chinese: 三條紅線, Simplified: 三条红线, Pinyin: sān tiáo hóng xiàn) are

liquidity crisis in Q4 2021.^[2]

History

In 2017,

government started to tighten the real estate market based on the principle that "property is to be lived in, not to be speculated on."^[3]

^: 161

However, the three red lines were not introduced until August 2020. They stated property should adhere to the following rules:[4]

Liabilities should not exceed 70 percent of assets (excluding advance proceeds from projects sold on contract)
Net debt should not be greater than 100 percent equity.
Money reserves must be at least 100 percent of short term debt.

In March,^[

Ministry of Housing and Construction and other regulatory agencies jointly issued a document requiring the prevention of irregular flow of loans for business purposes into the real estate sector, and the officials of the Ministry of Housing and Construction even personally went to localities to inspect the real estate situation.^[5]^{[failed verification}

]
Since December 2021, borrowing to finance acquisitions and mergers would not be included in red line metrics. This was to help facilitate financially healthier firms to buy assets from indebted companies.[4]

References

^ "What China's Three Red Lines Mean for Property Firms". BloombergQuint. 8 October 2020. Retrieved 2021-12-13.

^ Cheng, Evelyn (2021-10-19). "How Evergrande found itself on the wrong side of China's regulators". CNBC. Retrieved 2021-12-13.

ISBN 978-1-9848-7828-1
.

^ ^a ^b "What China's Three Red Lines Mean for Property Firms". The Washington Post.

^ "Financing Three Red Line Into the Industry Target". Shenzhen Securities Times. 2021-08-28. Retrieved 2022-11-02.

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[1] "What China's Three Red Lines Mean for Property Firms". BloombergQuint. 8 October 2020. Retrieved 2021-12-13.

[2] Cheng, Evelyn (2021-10-19). "How Evergrande found itself on the wrong side of China's regulators". CNBC. Retrieved 2021-12-13.

[3] ISBN 978-1-9848-7828-1
.

[:0-4] "What China's Three Red Lines Mean for Property Firms". The Washington Post.

[5] "Financing Three Red Line Into the Industry Target". Shenzhen Securities Times. 2021-08-28. Retrieved 2022-11-02.

[2]

[3]

[5]