The economy is down and the market is sluggish, but debt is getting higher and higher. (Image source: Adobe stock)
[Look at China News on December 1, 2021](Look at a comprehensive report by Chinese reporter Wenlong) ChinaReal Estate Enterprise China FortuneIssue an announcement, breach of contractdebtThe total principal and interest amounted to 101.304 billion yuan. in addition,real estateDevelopers are facing a total of up to 12 billion US dollars of redemption pressure this month,economyThe downward market is sluggish, but debt is getting higher and higher.
On December 1, according to the “Daily Business News” report, China Fortune Land Development’s default debt continued to climb. As of November 29, the accumulated debt principal and interest that failed to be repaid on schedule had exceeded 100 billion yuan.
Up to now, China Fortune Land Development has issued 14 copies of the “Announcement on the Failure to Repay Certain Debts of the Company and Its Subsidiaries”.
China Fortune Land Development announced that the company is coordinating the extension and other related matters with financial institutions that have failed to repay the debt and interest on schedule. The company’s liquidity has been tight in stages. Recently, the company and its subsidiaries have added 7.325 billion yuan of debt principal and interest that failed to repay bank loans and trust loans on schedule, and the total principal and interest of default debt reached 101.304 billion yuan.
Within 10 months of China Fortune Land Development, the scale of its debt defaults soared from 5.255 billion yuan to 101.304 billion yuan.
Due to default arbitration due to debt issues, China Fortune Land Development issued another announcement on arbitration on November 30, stating that it had recently received an arbitration notice from the China International Economic and Trade Arbitration Commission because it failed to repay the principal of China Jingu International Trust Co., Ltd. on schedule. For the creditor’s rights amounting to 1.91 billion yuan, Jingu Trust applied to the China International Economic and Trade Arbitration Commission for arbitration.
China Fortune Land Development announced its debt restructuring plan on October 8. It is still at the stage of communicating with creditors on the content of the plan and has not yet been implemented.
The liquidity crisis in China’s real estate market has caused concerns in the global market, and real estate developers are facing the expiration of trust products totaling 12 billion US dollars in December, which once again poses a major challenge to China’s real estate industry.
According to a “Bloomberg” report, Chinese real estate companies have defaulted on high-yield, short-term products worth more than US$10 billion this year. In addition, there is at least a potential loss of 10.9 billion US dollars in other wealth management products of developers such as China Evergrande Group.
After years of rapid growth, the Beijing authorities have taken measures to suppress the real estate industry, and real estate developers have tried their best to maintain liquidity and avoid breaking the capital chain. The crisis in China’s real estate market is gradually spreading to the US$3 trillion trust market, which will put more pressure on China’s financial system.
UOB Kay Hian (UOB Kay Hian) analyst Ziv Ang said that trusts that are about to expire will increase the burden on real estate developers to repay their debts, which means that the overall risk of default may be higher.
Although the People’s Bank of China has instructed the banking industry to loosen restrictions on real estate loans and the authorities have also instructed local governments to expand construction spending, trusts are still strictly controlled. According to people familiar with the matter, they have been asked to reduce their exposure to real estate and limit new issuance. Since August, at least two trust companies have suspended the issuance of new real estate products.
Yanting Zhou, chief economist at Wood Mackenzie, a global research and consulting company, said that China’s economy is expected to increase its annual GDP growth rate from the third in the second half of 2021 under the adverse effects of floods, epidemic outbreaks, and power rationing. The 4.9% in the quarter further slowed to 4% in the fourth quarter. In addition, economic growth in 2022 is estimated to slow to 5.4% from 8.1% this year.
In addition, the lockdown measures against the epidemic and the pressure of regulatory control policies will lead to a slowdown in economic growth next year. But the debts of government departments, enterprises and households are getting higher and higher.
China Evergrande Group is the world‘s most indebted real estate developer. The current debt dilemma has impacted the entire industry. Evergrande has business dealings with most of China’s 68 trust companies. According to the latest data, trust products accounted for approximately 41% of Evergrande’s total financing. According to the China Trustee Association, as of the end of June, developer trusts accounted for 13% of all outstanding trusts.
Analysts said that the cash position of real estate developers is now very bad, and it is necessary to observe whether the decline in trust financing will improve or worsen in the future.
Guosheng Securities estimates that the total amount of trust products due by Chinese real estate developers in December is 14 billion U.S. dollars, including some products for which no data is provided for commercial benefit tracking. Guosheng Securities also mentioned that the repayment pressure will increase in March, May and June next year, when more than $50 billion of trusts will expire each month.
In addition to trust products, the urgent need to pay bond coupons may also worry investors. According to data compiled by Bloomberg, Chinese real estate developers need to repay approximately US$2.1 billion in offshore bonds in December and January.
Editor in charge: Xin He Source: Look at China
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