Property in China, another liquidation petition: this time it's Shimao Group's turn
Real estate
Posted by MoneyController on 10.04.2024
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The picture of China's property market is getting more complicated as yet another major player has filed for liquidation.
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 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.
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%.
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.
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China: will the government's moves be enough to reassure markets?
