The Evergrande contagion risks spreading widely throughout China. This is the risk inherent in the Chinese creditors’ rejection of the further six-month postponement, in January 2023, of the coupon on the bond. onshore from 671 million dollars of the subsidiary Hengda.
In practice, it is the antechamber of the first default of the real estate giant in its own home, destined to have lethal consequences for the entire social system: in China, bank customers are discouraged – by hook or by crook – from withdrawing from their accounts and, for this, they protest. Now even those who have focused on real estate, small but also very small investors, could remain dry-mouthed.
Debt risk for many families
On the other hand, as the report China in 2022 of the ICCF (Italy China Council Foundation) study center reveals in the chapter based on the reconstruction made by the economists of Intesa Sanpaolo, they are getting more debt also and above all because of the dwelling. At the end of 2020, more than 62% of the non-financial sector debt was attributable to households, a percentage that rises to 72% if subsidized loans from the Housing Fund are also included.
Evergrande’s fate, second property developer in China, it remains uncertain. The ongoing restructuring is not very clear, the hypotheses of dismemberment of the conglomerate return several times. In fact, in December there was the first default of a bond offshore while, so far at least, Chinese creditors holding bonds onshore they have always been satisfied and privileged over foreign creditors, banks and funds. One of the reasons evidently lies in the numbers, because the largest portion of the $ 300 billion in debt, or more than two-thirds of the total, is pulverized in the hands of the Chinese.
The entire real estate sector is expected to decline
On the other hand, the destinies of China revolve around the brick. The tightening of credit to the real estate sector, in the last two years, in the plans of the central authorities, was to reduce the financial risk and avoid an excessive increase in house prices. So, stop speculation in the name of “common prosperity” and the house “to live”. “Now the prospect is that the real estate sector has entered a phase of structural slowdown due to the slowdown in urbanization and the aging of the population, with a consequent braking impact on the dynamics of GDP in the coming years as well as on the demand for raw materials. part of China, ”the report reads.