Signs of stress at a firm like Greenland, China’s 11th-largest builder, is a worrying sign that even borrowers which enjoy some level of state backing may no longer rely on support when they run into trouble. The builder’s extension proposal “signals quasi state-owned developers aren’t immune to a liquidity crisis caused by prolonged Covid-zero lockdowns and heightened refinancing pressure due to market shutdown for weak developers,” wrote Bloomberg Intelligence analysts Dan Wang and Daniel Fan in a report. SOEs, companies that are backed by local or provincial governments, have so far been spared from the credit crisis sweeping the real estate sector as authorities moved to clamp down on these debt-saddled borrowers. A payment failure at Greenland may prompt a drastic repricing of risk among state firms and “an onslaught of rating downgrades could happen and lead to systemic risk for the financial system,” Wang and Fan wrote.
HONG KONG — Home sales in China have been tumbling for months as potential buyers worry about weakened developers being unable to complete promised projects and grow anxious about the country’s economic direction. But last month’s COVID lockdowns in Shanghai and other areas turned April into a rout for many property companies.