China’s Property Sector and its Main Challenges

Real estate companies in China have to cope with various issues on a daily basis. Financial distress among the country’s real estate companies came to the forefront in the last several months as China Evergrande Group and other developers struggled to deal with financial problems. The state of the country’s property sectors is far from being ideal.

 This week, rating agency Fitch downgraded Evergrande and Kaisa to “restrict default.” Evergrande and Kaisa missed their respective bond repayment deadlines. So, it is not surprising that Fitch downgraded Evergrande and Kaisa.

 After defaulting on a payment, a world-famous rating agency rates an issuer’s restricted default. However, it has not initiated any procedures to wind up the business, such as filing for bankruptcy.

China’s property sector and top policymakers

In spite of all the problems, one analyst believes that it is possible to help China’s property sector. Logan Wright from Rhodium Group stated that China’s property outlook could turn brighter in the next several months.

 Nonetheless, two things must happen to improve the country’s property sector. He mentioned two important topics, stabilizing property sales and greater access to funds within China. Both of them could help lift the real estate sector in the country.

 He pointed out that a continued decline in property sales will add financial pressure on real estate developers. In the meantime, lower interest rates would help stabilize bank lending growth in China and reduce borrowing costs to the real economy. 

According to Wright, markets will now be focusing on the country’s annual Central Economic Work Conference. The meeting among top policymakers could reveal additional steps to stabilize the property sector and the economy as a whole.

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