Poly Developments Is in a Balancing Act Between Earnings Growth and Balance Sheet Strength

As the Chinese property market enters a consolidation phase, large developers will be the main beneficiaries as smaller players and nonspecialist firms are pushed out of a market characterized by greater pricing pressure and less funding liquidity. Changing demographics will lead to slower urbanization and lower fixed-asset investments, and the capital market will see tighter liquidity as the central government seeks to deleverage gradually. In our view, the buoyant property market and the accommodative policy environment are mostly in the past.