Participants expect these policies to continue to have a strong effect on the market for the remainder the year, which would slow down growth for rebar demand.
Three red lines
The People’s Bank of China and the Ministry of Housing & Urban-Rural Development outlined “three red lines” to restrict the financing of housing developers. These came into effect on January 1, 2021.
The three red lines are as follows:
Liability-asset ratio, excluding advance receipts, is greater than 70%.
Net debt ratio is greater than 100%.
Ratio of cash to short-term debt is less than 1.
Housing developers that “cross” these three red lines are classified as “red,” and the scale of their interest-bearing liabilities are not to be increased.
Companies that fulfill two of the three criteria are classified as “orange,” and the annual growth rate of their interest-bearing liabilities shall not exceed 5%.
Companies that only cross one red line are classified as “yellow,” and...