- China’s long-standing real estate crisis could get even worse.
- Concerns about Vanke have been raised following reports that the government-backed real estate developer is seeking an extension to its debt maturities.
- If Vanke defaults on its debts, it could undermine confidence in all real estate developers in China.
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China’s long-running real estate debt crisis has already devastated real estate giants Evergrande, It is currently being liquidated.
home sales and prices in that country was also sluggish.
But China’s property crisis could get even worse.
“I think there’s an assumption at this point that the level of market activity has dropped so much that things can’t get any worse, but that’s not actually the case,” said Charlene Chu, senior analyst at Autonomous Research. ” he said.Said bloomberg tv on monday.
Chu — who issued the warning about china’s debt More than a decade ago, he said China was still “in the midst of a real estate sector collapse, and the situation could get even worse.”
Concerns grow over another Chinese real estate giant
Mr Chu’s assessment of China’s real estate market comes amid growing concerns about state-backed developer Vanke and China’s real estate market. 2nd largest developer by revenue last year.
Investors have been dumping shares and bonds in Vanke this month following reports that the company is aiming to raise another round of funding. extend the maturity of debt Relationships with insurance companies indicate financial difficulties.
Friday, Vanke It said it had deposited funds to repay $630 billion in bills due Monday. The Chinese government also asked banks to step up lending to Vanke and called on creditors to extend debt redemption deadlines. Reuters reported on Monday, citing two anonymous sources familiar with the matter.
Authorities are coordinating talks between Vanke Bank and banks to help Vanke Bank avoid defaulting on its obligations. bloomberg reported on Tuesday, citing anonymous sources familiar with the matter.
The Chinese government’s intervention in Vanke highlights how important the real estate giant is to China’s economy. Last year, the company sold products worth 375.5 billion Chinese yuan, or $52.2 billion. real estate.
However, Vanke’s importance lies in more than just the number of apartments it sells. That number is significant, as it has been consistently ranked as one of China’s top development companies for at least the past decade. Instead, the fact that it is a huge state-backed company is important. State-owned Shenzhen Metro holds a one-third stake in Vanke.
Vanke was considered despite China’s real estate recession Financially sound developer It is also one of the few Chinese developers that still holds investment grade credit ratings from S&P Global and Fitch. Moody’s downgrades Vanke rating To the junk on Monday.
Notably, the Chinese government’s move comes just days after China’s Housing and Urban-Rural Development Minister Ni Hong said the country had no intention of bailing out struggling real estate developers.
“Real estate companies that are seriously insolvent and have lost their management capacity must go bankrupt and be reorganized in accordance with the principles of the rule of law and marketization,” Nie said. he said at a press conference.
But Vanke Enterprises is different — if Vanke Enterprises were to default on its debts, it would undermine trust in the state-owned developer, Chu said.
“I think if state-owned companies are not secure, it could lead to a loss of confidence among almost every developer in the country,” she told Bloomberg.
There are also concerns that China’s property crisis could spread more broadly domestically and cause contagion in China. world economy.
Vanke University and China’s State Council News Office did not immediately respond to Business Insider’s requests for comment.