A Bloomberg Intelligence gauge of China real estate developers extended losses to as much as 4 per cent in the afternoon, the biggest tumble in a month. The CSI 300 Real Estate Index dropped as much as 2.8 per cent.
Tighter lending also heightens default risks for LGFVs. They’ve become major borrowers in domestic and offshore credit markets with combined debt loads that have exploded to more than $US11 trillion in recent years and whose credit ratings are closely tied to the financial strength of local governments.
LGFVs have stepped up purchases of land parcels as cash-strapped developers like China Evergrande Group hoard cash, supporting a slumping market.
A major drop in land sales would bode ill for the world’s second-largest economy, which slowed in the third quarter as the property and construction sectors shrank.
China’s biggest banks are walking a fine line over the struggling property sector, which has been battered by a series of debt defaults, plunging home sales and lower prices in some cities. While lenders are being encouraged by regulators to extend credit to stronger developers, they’re also under pressure to keep loan losses contained and avoid financing property firms and LGFVs that have borrowed excessively.
The total debt of LGFVs soared to about 53 trillion yuan ($A11 trillion) at the end of 2020 from 16 trillion yuan in 2013, according to economists at Goldman Sachs Group Inc. That’s more than half the size of China’s gross domestic product.
Chinese banks had more than 51.4 trillion yuan of outstanding loans to the real estate sector as of September. The exposure was more than any other industry, and accounted for about 27 per cent of the nation’s total lending, according to official data.
Bloomberg
Chinese banks impose new restrictions on property loans to local government firms - The Australian Financial Review
Read More
No comments:
Post a Comment