Worse Than Expected – China’s Property Market
China’s economy has had to deal with some harsh events, one of the most severe being the Evergrande scandal. The property developer borrowed billions of dollars, but they couldn’t keep up with the interest payments, and the situation became bad. Evergrande ended up defaulting on payments, and it created a dent in the Chinese property market as the company hasn’t done well on its restructuring plan either.
The situation has not improved at all since last year, and the bottom might not be reached yet. Bonds of Chinese property companies are sinking every day, and they are worthless now. The most recent example is CIFI Holdings, who suspended payments on its offshore debt after failing to reach a deal with creditors, which points to a likely default. Its bonds for 2028 are valued at 6 cents, displaying a 91 percent decrease from the beginning of the year and a 25 percent decrease on the day of the announcement. CIFI was considered to be a “model developer” by China just a couple of months ago, and they were included in a group of 6 that received bond guarantees to help reduce the effects of the market. These nasty financial situations are paired with the fact that home sales are plummeting in China already, displaying a slowdown in the housing market that doesn’t help with the situation. Property developers have lost foreign investors they once had, and it puts this part of the Chinese economy in a dangerous situation.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.