8 leading Chinese real-estate firms face mounting risk: Wanda, R&F, Evergrande, Aoyuan, China Overseas Grand Ocean Group, China South City Holdings, CIFI, Fantasia
June 26, 2014 Leave a comment
8 Chinese real-estate firms face mounting risk: report
Liang Shih-huang and Staff Reporter
2014-06-22
US financial services company Standard & Poor’s recently listed eight leading real-estate firms in China and Hong Kong that are facing liquidity risks and a breach of contract violation because of capital pressure exerted by declining sales.
The firm stated that eight leading real-state companies in China, namely, China Aoyuan Property Group, China Overseas Grand Ocean Group, China South City Holdings, CIFI Holdings, Wanda Commercial Properties, Fantasia Holdings, R&F Properties and Evergrande Real Estate Group, had reported debt growth of over 50% in 2013.
Evergrande Real Estate Group doubled its debt in 2013 from a year previously.
Standard and Poor’s also voiced its concerns for smaller property developers saying their re-lending risks were worsening and they might even face severe liquidity risks and fail to pay off their bonds if their sales performance did not improve.
According to data from the National Bureau of Statistics, housing prices in 70 large and medium-sized Chinese cities slipped and the downturn has extended to first-tier cities, such as Beijing and Shanghai.
An analyst from the firm stated that lending costs among Chinese real estate developers has increased substantially in 2014 and the lending channels of banks and issues of bonds has tightened, due to which funding pressures have widened.
Since the central government has become more cautious in releasing liquidity, these Chinese firms are not expected to gain cash flow stemming from government policies in the near future.
Some Chinese real-estate firms are facing worsening financial difficulty, however, because they expanded their lending to acquire land despite the pessimistic prospects of the housing market.
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