Real estate

Property in China, another liquidation petition: this time it's Shimao Group's turn

Posted by MoneyController on 10.04.2024

The picture of China's property market is getting more complicated as yet another major player has filed for liquidation.

China Construction Bank files for liquidation of Shimao Group

The crisis in China's property market continues. After Evergrande and Country Garden, the Shimao Group is the latest to be hit. None other than China's state-controlled China Construction Bank filed for Shimao's liquidation in Hong Kong. According to an article by Scott Murdoch in Reuters, the reason for this request is that the property company has failed to repay debts totalling more than USD 200 million.

The stock market, the restructuring plan, the default on a billion-dollar bond

The legal action has dealt a severe blow to the stock market, with shares falling by almost 19%. The company has announced that it intends to pursue a restructuring plan: this plan would involve the $11.2 billion of offshore debt and the intention would be to reduce it by around 60%. However, it should be added that Shimao has already defaulted on a $1 billion bond plus interest due in July 2022. As noted in Murdoch's Reuters article, Leonard Law, senior credit analyst at Lucror Analytics, believes that the strategy of those invested in Shimao will now be to get as much as they can.

Fitch revises Chinese debt outlook

China's property market began to enter a crisis in 2021, which (given its size) has had a knock-on effect on the Chinese economy as a whole. Against this backdrop, Fitch has revised its outlook on Chinese debt from stable to negative. However, as Marco Sabella writes in the Corriere della Sera, this has not led to a downgrade of the sovereign debt, which remains rated A+. Fitch has again downgraded China's economic growth for this year, although it will still be 4.5%.

The weakness of the property market and the strength of the Chinese economy

As we read in an article by Evelyn Cheng in CNBC, which reports some interesting comments by Nomura's chief economist Richard Koo, the Chinese government's narrative speaks of a period of 'adjustment' in the property market rather than a crisis, and instead emphasises the current strengths of the Chinese economy, namely electric vehicle production and manufacturing.

Read also:

More trouble for Chinese real estate: Country Garden sales nosedive and shares suspended on the stock exchange

China: will the government's moves be enough to reassure markets?

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