Chinese real estate developers have used off-balance-sheet vehicles to borrow money. Nearly every developer has borrowings in disguise.

by KoreanBoyscout

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“Nearly every developer has borrowings in disguise. The sector’s debt problem is worse than what you see,” said He Siwei, attorney at Hui Ye Law Firm.

Chinese developers owed 33.5 trillion yuan ($5.24 trillion)through various channels at the end of June, Nomura estimates, based on official statistics, adding “there are definitely other obscure financing channels yet to be covered.”

Private bonds issued by shell companies in offshore locations have emerged as a new concern.

In a note this month, Fitch ratings agency said that Fantasia Holdings Group (1777.HK), a property developer which has since defaulted, had recently told it “for the first time” that it had $150 million of private bonds that do not appear to have been reported in its financial statements.

Fantasia did not respond to a request for comment. The company had over $4 billion worth of cash at the end of June and two weeks before it defaulted said that it had “ample capital”.

There hasn’t been a lot of coverage on this but article like this is kind of scaring me. They say there won’t be any serious problem in the states and the US stock market. Any thoughts?


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