[Epoch Times September 12, 2021](Epoch Times reporter Xu Cuiling reported) Aussex Bank recently released a report stating that the overall short-term debt ratio of China’s top 30 real estate companies in the first half of this year has risen from 1.18 in the same period last year. 1.23. In addition to China Evergrande Group, which is in deep financial trouble, it is not excluded that some large-scale real estate companies in China may face a liquidity crisis, and it is predicted that China’s real estate control policies will not be loosened soon.
According to the “Fourth Quarter China Real Estate Market Outlook” report released by Wang Rui, senior China economist at AxB, China’s tightening of real estate regulation has led to a rapid slowdown in development and construction activities, which will put pressure on growth prospects in the coming quarters.
Australia Sheng Bank estimates that the contribution of real estate to China’s GDP growth will fall from 0.7 to 0.8 percentage points before to 0.1 percentage point; the annual growth rate of China’s real estate development investment in the fourth quarter may fall to 1% to 2%, less than 2 years The average is 5% to 6%, while the annual growth rate in the same period last year reached 9.9%.
Aussie Bank said that for individual real estate companies, liquidity is still the biggest concern in the short term. With difficulties in obtaining bank financing and slowing real estate sales, real estate companies that step on the “three red lines” are at high risk. In the first half of this year, five of China’s top 30 real estate companies stepped on the “three red lines.”
In August 2020, the Chinese government formulated the “three red lines” of financing rules for real estate companies, including the short-term cash debt ratio of real estate companies less than 1, the net debt ratio of real estate companies greater than 100%, and the asset-liability ratio of real estate companies excluding advance receipts greater than 70 %, real estate enterprises must complete the adjustment within 3 years, in line with the “three red lines.”
Evergrande Real Estate stepped on the three red lines of real estate companies and was restricted by the Chinese regulators to draw money. Many of its construction projects were suspended for a long time, and even “jumping” large losses of 50% and 30% were sold. In August, Evergrande reported a debt of US$304 billion and its credit rating was downgraded. Market participants pointed out that if Evergrande’s funds were broken, it would become the Chinese version of “Lehman Brothers.”
Regarding the whirlwind of housing prices in China and all investors being cut from leeks, Guangxi Lin, a Taiwanese businessman, said that before the policy was unclear, most buyers held a wait-and-see attitude. Now Evergrande’s price cuts may not necessarily be taken over by customers. As for the collapse of Evergrande, will it cause a domino effect and cause the housing market to collapse? He believes that real estate has a huge impact on the economy, and state-owned enterprises should eventually take over. In September, many third-tier cities issued “restriction orders”, which also greatly reduced the possibility of volatility in the housing market.
Zhuang Menghan, a visiting professor at Deming University of Finance and Technology, said that Evergrande Real Estate is burdened with US$300 billion in debt owed to banks, suppliers and home buyers. Evergrande’s debt is increasing unabated, and debt is an unimaginable figure. At this time, it is taking measures to improve the corporate health in order to avoid a larger housing market bubble.
Zhuang Menghan said that China’s housing prices have risen far more than income growth, and more than 80% of people want to buy real estate. Everyone buys several properties. Ghost cities are everywhere, which is in full compliance with the price bubble index. In order to avoid liquidity risks from causing bank risks, the other side must intervene.
Editor in charge: Yuzhen
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