Bond defaults of China’s property developers surge as they face debt crisis
Published: Oct 07, 2021 08:18 PM
Evergrande Group Photo: CFP

Evergrande Group Photo: CFP

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

The data showed that as of September 27, the number of bond defaults by real estate enterprises in 2021 stood at 39, up 25 from 2020, for a cumulative amount of 46.75 billion yuan ($7.2 billion), an increase of 159 percent year-on-year.

Cong Yi, a professor at the Tianjin University of Finance and Economics, told the Global Times on Thursday that the reason why the property firms face a debt crisis is that they crossed the three "red lines" of the real estate market as outlined by China's top market regulator, which aims to avoid excessive financing.

In the short run, the debt woes may have some impact on China's overall economic performance, Cong noted.

As of June 30, Evergrande's total liabilities had swelled to 1.97 trillion yuan ($305 billion) on the back of 2.38 trillion yuan in total assets, according to its interim financial disclosure at the end of August. 

Mirroring its high levels of debt, the company's interest-bearing debts hit 571.7 billion yuan as of the end of June, among which debts due within a year stood at 240 billion yuan.

As of September 4, CFLD had failed to repay a total of 87.89 billion yuan in outstanding debt while as of July 30, the borrowings due from Tahoe totaled 43.7 billion yuan.

Fantasia Properties, another Chinese property developer, has been downgraded to default or near default status by Fitch Ratings, one of the three major credit rating companies, after it failed to repay $205.7 million debt due on Tuesday.

Moreover, the financing by 100 major Chinese real estate enterprises in the first nine months of 2021 reached 109.19 billion yuan, narrowing 21 percent year-on-year due to the government's tightened financing policy. 

In the third quarter, these firms raised as much as 287.2 billion yuan, down 38 percent year-on-year and the lowest level since 2018.

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

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

Global Times