Moody’s: rebound for China property unlikely to improve ratings

Hong Kong, August 13, 2009 -- Moody's Investors Service says the rebound
in China's property market in the first half of 2009 is unlikely to
result in improvement in its ratings for Chinese developers. 

A recently published comment by Moody's notes that the developers have
had a positive first half off the back of a strong turnaround in the
property market and improving access to funding. However, the agency
notes that there is considerable uncertainty as to the duration and
strength of such a recovery given the high regulatory and operating
uncertainties in China.

In addition, Kaven Tsang, the report's lead author and a Moody's analyst,
adds, "Some of our issuers still have weakened balance sheets and
liquidity positions, while a few small developers and others have
obligations related to upcoming large land payments and short-term,
offshore debt."

Tsang adds, "We are also cautious about the strategies of many developers
in managing their balance sheets because they have previously shown a
willingness to extend their balance sheet with debt when acquiring land
during 2007 and early 2008 just before the property market turned."

In commenting on a recent sharp drop in Chinese banks' lending for July,
Tsang notes, " The numbers confirm our expectations of a slowdown for the
year's second half. Although draconian governmental measures to tighten
credit are unlikely, we question the sustainability of the strong rebound
in the Chinese property market, which depends on the central government's
continuation of a relatively relaxed lending policy."

Peter Choy, a Moody's senior credit officer and co-author of the
published comment, says, "Some cash-strapped developers have taken
advantage of the fist half's recovery in the property market to issue
convertible bonds and equity or sell assets, which will help restore
developers' balance-sheet liquidity." However, Choy warns, "These
improved financial profiles may again deteriorate if some issuers rush to
replenish their land holdings, so financial discipline remains a key
rating consideration."

The recently published report, entitled, "China's Property Developers:
Operating environment and strategies remain uncertain over the near
term," is available at www.moodys.com.

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