Chinese property developers’ defaults rise as they face debt crisis

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Evergrande group photo: CFP

A few Chinese real estate developers, including Evergrande Group, CFLD and Tahoe, are facing liquidity problems, according to data released Wednesday by CRIC, a real estate research center.

Data showed that as of September 27, the number of debt defaults by real estate companies in 2021 was 39, up 25 from 2020, for a cumulative amount of 46.75 billion. yuan ($ 7.2 billion), an increase of 159% year-over-year. -year.

Cong Yi, a professor at Tianjin University of Finance and Economics, told the Global Times on Thursday that the reason real estate companies are facing a debt crisis is that they have crossed the three “lines. reds’ of the real estate market as described by China. main market regulator, which aims to avoid overfunding.

In the short term, debt problems could impact China’s overall economic performance, Cong noted.

As of June 30, Evergrande’s total liabilities had reached 1.97 trillion yuan ($ 305 billion) out of total assets of 2.38 trillion yuan, according to its interim financial information at the end of August.

Reflecting its high level of indebtedness, the company’s interest-bearing debts reached 571.7 billion yuan at the end of June, of which debts within one year amounted to 240 billion yuan.

As of September 4, the CFLD had not repaid a total of 87.89 billion yuan of debt while on July 30, loans owed to Tahoe amounted to 43.7 billion yuan.

Fantasia Properties, another Chinese real estate developer, was demoted to default or near-default status by Fitch Ratings, one of the top three credit rating companies, after failing to repay $ 205.7 million in debt due Tuesday.

In addition, the financing of 100 major Chinese real estate companies in the first nine months of 2021 reached 109.19 billion yuan, declining 21% year-on-year due to the government’s tight financing policy.

In the third quarter, these companies raised up to 287.2 billion yuan, down 38% year-on-year and the lowest level since 2018.

CRIC suggested that in the fourth quarter, real estate companies will be more cautious in their investments with a lower volume of financing.

Total bonds maturing during this period will reach 108.2 billion yuan, a decrease of 19% from the third quarter.

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