The real estate company has more than $ 300 billion in debt, according to official figures.
(Photo: Reuters)
Dusseldorf The problems in the Chinese real estate market are coming to a head. More and more property developers are experiencing payment difficulties. Even at the highly indebted Chinese real estate company Evergrande, several interest payments totaling $ 181.5 million are due on Saturday.
The 30-day grace period for a $ 148 million payment will also end on November 11th. If this is not paid on time, a formal payment default occurs. Last week, Evergrande was only just able to avert a default for the second time.
The crisis of the second largest Chinese real estate developer has been worrying the international financial markets for weeks. According to official figures, the company has debts of more than $ 300 billion. There is also speculation about further off-balance sheet debts.
A crisis in the group could have a negative impact on the real estate market, which recently contributed around a third to Chinese economic growth. There is therefore great concern in China. In addition, prices for new properties fell in September for the first time in six years. This further exacerbates the liquidity problems of highly indebted real estate groups.
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On Friday, trading in shares in the Chinese construction company Kaisa Group and three of its daughters in Hong Kong was suspended at the company’s request. Previously, the developer, who is number 25 in the Chinese market, was unable to make a payment due on a financial product for private investors in a timely manner.
Kaisa wants to accelerate share sales
Many highly indebted real estate developers have sold so-called wealth management products to small investors and lured them with high interest rates. In this way, the corporations were able to bypass the borrowing restrictions imposed by the Beijing government in August 2020.
The Shenzhen-based parent company of Kaisa said in a statement on Thursday that it was facing an unprecedented liquidity squeeze due to the challenging real estate market and rating downgrades. To raise money, Kaisa wants to accelerate the sale of shares.
In the meantime, the payment problems for onshore bonds are also increasing. Many property developers have so far primarily paid for these. Trading in the bonds of the Shanghai Shimao and Xiamen Yuazhou Grend Real Estate in Shanghai was suspended on Thursday. Chinese high yield fell for the eleventh day in a row.
China wants to cool the overheated real estate market
The reason for the adjustment in China’s real estate market is the increasing regulation of the industry by the Chinese government. In the past few months, it had taken a number of measures to cool the country’s hot real estate market. The government recently made it clear that the companies themselves must be responsible for their payment obligations.
According to the Bloomberg news agency, officials from the National Development and Reform Commission and the State Foreign Exchange Service told developers at a meeting in Beijing last week that they should make their payments on time if possible.
In addition, Evergrande’s billionaire founder Xu Jiayin was asked to use his personal fortune to overcome the company’s crisis.
With agency material
More: The Evergrande case is also a lesson for investors.