The impact of China’s property crisis is being felt around the world with investors and creditors trying to sell global real estate to shore up their domestic holdings and pay off debt.
China’s property sector accounts for almost a third of the country’s economic activity and an industry-wide meltdown, triggered by a crackdown on excessive borrowing which began several years ago, has not only weighed on growth but sapped the confidence of investors and consumers.
Just days ago a Hong Kong court ordered the liquidation of China Evergrande, the world’s most heavily indebted developer, with more than £238billion ($300bn) worth of debt.
A slew of overseas assets have started to hit the market as landlords and developers scrabble for cash to pay off debts and keep projects in China afloat.
A unit of China Aoyuan Group Ltd. hit the headlines recently with its 45 percent discounted sale of a plot in Toronto, demonstrating the hard choices being made by companies in the wake of Beijing’s crackdown on borrowing.
Bloomberg reports a London office building linked to Wing Mau Hui, the chairman of Shimao Group Holdings Ltd., sold at a discount of about 15 percent on an earlier sale agreed in 2022 which failed to close.
Chinese authorities recently sought to relieve some of the pressure on China’s real estate market by freeing up financing in a bid to enable developers to finish projects imperiled by their financial troubles.
China’s CCTV state television network reported banks were extending almost £1.9bn ($2.5bn) in loans to 83 real estate projects chosen for support as part of measures to rescue the industry.
Markets in Shanghai and Shenzhen have languished, partly because of heavy selling of property shares following Beijing’s crackdown on excessive borrowing by developers.
Defaults among dozens of developers undermined confidence in the Chinese government’s efforts to revive the economy in the wake of the Covid pandemic.
In further evidence of weakness, China reported on Thursday (February 8) that consumer prices fell 0.8 percent in January from a year earlier, the lowest level since September 2009 amid the global financial crisis.
In his Chinese New Year address on Thursday, President Xi Jinping urged fellow leaders to “effectively strengthen economic vitality, prevent and resolve risks, improve social expectations, consolidate and enhance the upward trend of economic recovery, continue to improve people’s well-being, and maintain harmony and stability in the overall social situation.”
Economists say restoring strong and sustained growth will hinge on reforms needed to make China less reliant on investments in construction and export manufacturing.
