- China’s real estate sector has been hit by a debt crisis in recent months as the cash crunch of the world’s most indebted developer Evergrande came to a head.
- Fitch said in its report that in a severe scenario where residential home sales drop by 30%, 12 or roughly a third of its 40 rated developers could go into negative cash flow.
- Fitch also highlighted the emergence of “hidden private debt” that’s set to worsen the liquidity strain.
As many as one third of 40 Chinese property developers rated by Fitch Ratings could suffer a cash squeeze in a severe scenario where home sales revenue drops by 30% next year, says the ratings giant.
“The longer the stresses on China’s property sector last, the greater the risk of a loss in consumer confidence,” Fitch said in a Dec. 20 report.
Hong Kong (CNN Business)The World Bank has cut its forecasts for China’s economic growth this year and next, as the world’s second largest economy faces mounting headwinds from the new Omicron variant to a severe property sector downturn.
The bank now expects China’s GDP to expand 8% in 2021 compared with a year ago — that’s lower than its previous forecasts. (In October, the World Bank expected China to grow 8.1% this year. In June, it projected a growth of 8.5%.)
It also cut its 2022 forecast from 5.4% to 5.1%, which would mark the second slowest pace of growth for China since 1990 — when the country’s economy increased 3.9% following international sanctions related to the 1989 Tiananmen Square massacre. China’s economy grew 2.2% in 2020.
“Downside risks to China’s economic outlook have increased,” the World Bank said Wednesday in its latest report on China’s economy.
Evergrande's bondholders may soon be short another $255 million as the developer focuses on delivering homes and paying workers instead. Here's the latest on the embattled property giant t.co/ybD88IJezs
— Bloomberg (@business) December 28, 2021
China’s cash-strapped developers have become reluctant to acquire land even as some local governments relax bidding rules, adding to signs of their liquidity crunch and threatening to deepen the nation’s economic slowdown t.co/2ygKTW6qd2
— Win Smart, CFA (@WinfieldSmart) December 29, 2021