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Business News/ News / China: Housing crisis spurs record defaults, threatens to engulf surviving developers
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China: Housing crisis spurs record defaults, threatens to engulf surviving developers

China's housing crisis has hit private developers hard, with 34 out of the top 50 private-sector developers by bond issuance already experiencing delinquencies on offshore debt.

China's private developers face a housing crisis with record defaults and a shrinking group of survivors.  (REUTERS)Premium
China's private developers face a housing crisis with record defaults and a shrinking group of survivors. (REUTERS)

China's private developers are facing a deepening housing crisis marked by record defaults and a shrinking group of survivors.

As of September 1, 34 out of the top 50 private-sector developers in China, based on dollar bond issuance, have already experienced delinquencies on offshore debt, according to Bloomberg data. The remaining 16, including Country Garden Holdings Co., are confronting a combined $1.48 billion in onshore and offshore public bond payments for either interest or principal in September, the highest monthly amount until January.

Also read: Why China's President Xi Jinping is not attending G20 Summit in India? Explained

Country Garden recently delivered $22.5 million in interest on two dollar bonds within grace periods, averting what would have been its first default. This former top Chinese developer by sales is also seeking to extend principal payments for eight more yuan bonds after securing creditor support for similar extensions on another yuan note.

According to a Bloomberg index, Chinese junk dollar bonds, primarily from developers, now trade at an average of around 67 US cents, with Country Garden's dollar bonds indicating prices between 9 and 14 cents.

The debt burden on the 16 surviving developers highlights ongoing payment risks in the sector as a prolonged cash crunch enters its fourth year, despite Beijing's recent policy support, which has helped stabilise investor sentiment to some extent. However, investors are likely to remain apprehensive as embattled builders, along with other top private peers that have not yet defaulted, face over $8 billion in bond payments in the next six months.

Seazen Group Ltd. and Agile Group Holdings Ltd. are among the developers to watch next, as they have $104 million and $222 million in bond payments coming due this year, both onshore and offshore, respectively. State-linked companies like Sino-Ocean Group Holding Ltd. and China Vanke Co. are also on the list, illustrating that developers with varying degrees of government support are underpayment pressure.

Also read: China's President Xi Jinping to miss G20 Summit in India, Premier Li Qiang to attend

Bloomberg index tracking China's junk dollar notes, which are dominated by developers, experienced a 5% loss in August, the most significant decline since May. Although it has rebounded somewhat since last week following increased housing rescue efforts by Beijing, the index remains down more than 14 percent  in 2023, heading for a third consecutive year of declines.

(With inputs from Bloomberg)

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Updated: 05 Sep 2023, 02:23 PM IST
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