This article is from the Australian Property Journal archive
CHINA’S state-owned banks are reportedly making moves to bail out the country’s second-biggest property developer China Vanke after Moody’s downgraded its credit rating to “junk”, as the country’s real estate crisis took another turn.
China Vanke was one of the few remaining property developers that held an investment grade rating up until the latest rerating, and has about ¥34 billion of bonds maturing before the middle of 2025, according to Moody’s.
Twelve banks, including the six largest state-owned lenders, have been in talks to provide an ¥80 billion (nearly $17 billion) syndicated loan for China Vanke, Chinese state media has reported.
According to Cailianshe, provision of the loan is still uncertain, while the Economic Observer reported that multiple insurance companies are in a new round of debt negotiations with China Vanke, trying to avoid a default.
It is around one-third owned by Shenzhen Metro, held by Shenzhen’s state asset regulator.
China’s moves to quell the situation follow a Hong Kong court order for Evergrande, the world’s most indebted property developer, to be wound up, while China’s biggest private developer, Country Garden was deemed to be in default on a dollar bond for the first time late last year and is facing its own fight for survival.
China appears to be more willing to assist China Vanke, which is in a better financial situation than Evergrande and Country Garden.
China’s housing minister Ni Hong told reporters in Beijing on the weekend that real estate companies that “need to go bankrupt should go bankrupt, and those that need restructuring should be restructured.”
He said that fixing the property market – which accounts for a large piece of China’s economy – remains a “challenge”.
“The task of stabilising the market is still very difficult,” he said.
The real estate sector has been in crisis since Evergrande defaulted on its international debt in 2021, following Beijing’s introduction of the “three red lines” policy that crimped developers’ leverage.
Developers started defaulting on their debts en masse, and the result has been countless apartments unfinished or unsold, and house prices falling by around 10% in each of the past two years. According to data released by Australia’s ANZ Bank, China’s unsold residential property had surpassed 3 billion square metres at the end of 2023 – a glut that could take as much as three years to clear.
