This article is from the Australian Property Journal archive
CHINA’S real estate crisis continues to worsen after Tianjin-based Sunac China Holdings Limited applied for bankruptcy protection to protect its assets.
Sunac has filed for Chapter 15 bankruptcy in US courts, following in the footsteps of Evergrande.
It is seeking protection after creditors approved its US$9 billion offshore debt restructuring plan.
Sunac joins list of Chinese developers that have defaulted on their offshore debt.
Last week Sino-Ocean Group has suspended payment on all offshore debt, citing liquidity reasons.
Sino-Ocean is one of the top 20 real estate developers in China with over 800 projects across 80 cities from commercial offices, retail to apartments.
Earlier this week police in Shenzhen, southern China, arrested several employees within Evergrande – the world’s most indebted property developer – wealth management business.
Recently the People’s Bank of China (PBoC) cut the Reserve Requirement Ratio (RRR) by 25 basis points, bringing the average ratio for all banks down to 7.4%. According to the PBoC, this will release around 500 billion yuan for medium to longer term lending.
However, the National Australia Bank’s economist Gerad Burg said this policy easing is unlikely to have a material impact on China’s economic activity in the near term as there is currently no shortage of liquidity available for lending, with growth in money supply outpacing growth in lending since January 2022.
“Instead, loan demand appears to be weak, reflecting the deterioration in the property sector, soft private sector investment more generally and consumer caution,” said Burg.
Fitch Ratings’ chief economist Brian Coulton warns China’s property market downturn is casting a shadow over global growth prospects.
“The previously hoped-for stabilisation in China’s housing market has failed to materialise and new sales could fall by a fifth this year. Housing is a third of investment and 12% of Chinese GDP and has strong multiplier impacts on the wider economy. Policy easing has been underwhelming to date and export demand is falling,” said Coulton.
Meanwhile Beijing continues to pursue its public housing policy, which economists say will disrupt the market-oriented model of China’s real estate sector.
Although market-oriented private housing has brought prosperity to the economy and increased the asset value of households and local governments, it’s also been blamed for causing high living costs and much of the current debt and real estate crisis.
In keeping with President Xi Jinping’s guidance of “housing is for living and not for speculation” and “common prosperity”, China is ramping up the supply of public housing, which could represent nearly half of new housing supply in top-tier cities such as Shenzhen, Beijing, Guangzhou, Hangzhou and Nanjing.
ANZ China senior economist Betty Wang estimates China’s annual social housing investment to be at about CNY750bn or 7–8% of property investment (excluding land acquisition) in the 14th Five Year period (2021–25).
