Real estate inflection point approaching? The Three Red Lines Policy in China and enterprise valuation

This paper examines the challenges facing the Chinese real estate market, focusing on the impact of 'Three Red Lines Policy' on the valuation of enterprises. Using a double-difference model analysis of A+H share samples from 2017 to 2023, this study reveals a substantial adverse impact of the policy on enterprise valuation, characterized by both persistence and amplification. Furthermore, the paper underscores the policy's ramifications across various channels including enterprise profitability, debt servicing, operational efficiency, and growth prospects. Additionally, it conducts heterogeneity analysis and examines the policy's moderating effects. These analyses furnish a more holistic framework for future policy adjustments.