In 2022, China property developers are due to pay $100Bn on the debt maturity. The top of the table is Evergrande which already has many issues including $160mn in the bank account that is frozen by the state government due to nonpayment.
Several other companies have already defaulted especially on offshore bonds that were due and several other companies have been downgraded to junk ratings.
The other issue related to the sector is that the state government used to depend on land sales for 47% of revenue and that has already seen a record drop this year. In addition, the new home sales have dropped drastically and the construction at many project sites is halted due to cashflow problems.
All this is a perfect recipe for an economic crisis that will surely not only impact the country but also around the globe as default rises. The biggest test will be in July when Evergrande is supposed to present a restructuring plan to offshore bondholders.
Though currently, the government has reversed many of the restrictions on the sector to revive it will surely get worse before it gets better.
And do not think that it is an isolated issue but it will surely and soon repeat throughout the developed world as the central banks pull out the liquidity and go for increasing interest rates resulting in a correction in the most leveraged and hot mortgage markets.
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