(Reuters) – China Evergrande Group has rapidly become Beijing’s biggest corporate headache as it wrestles with debts of more than $300 billion and the fate https://reut.rs/3jrfpZG of the country’s second-biggest property developer is keeping global markets on tenterhooks.

A number of Beijing officials tried to assure investors that the crisis would not spiral out-of control, and that creditors’ rights will be protected. However, it is uncertain how long-term effects this will have on China’s economy and property sector.

These are the facts about China’s property market:

HOW BIG IS IT!

Economists claim that the biggest contributor to China’s Gross Domestic Product (GDP), this sector accounts for over a quarter of China’s related industries.

The world’s largest property developers have created a huge network of suppliers and service providers. This has helped create jobs and generate cash for the local governments. According to Japanese bank Nomura, China’s land sales account for three-quarters of the company’s revenues. In 2020 it was worth 27.3 trillion Yuan ($4.3 Trillion).

Macquarie estimates that 40% of Chinese households’ assets are property. It raises concern about the possibility of consumers feeling less wealthy and becoming more thrifty, which could have a negative impact on other parts of the economy.

According to Reuters calculations using data from the finance ministry, August saw a 17.5% drop in national land sales value, which is the largest decline since February 2020.

GHOST TOWNS

China currently has 65 million unoccupied homes. That’s equivalent to France’s total of 675,000 households.

China is betting on sustainable growth. A huge portion of its 1.4 billion inhabitants – some estimate that 70% – has their money invested in property. China’s central bank claims that last year, 93.6% (or a high percentage) of urban households owned their homes.

Because investors, developers, and home-buyers believe that real estate is too important to the economy to be allowed to decline, the market for it has continued to grow.

DEBT MOUNTAIN

China’s property industry is highly dependent on credit, and many developers are finding it difficult to pay back the debt. Nomura estimates that Chinese developers owed 33.5 trillion Yuan ($5 Trillion) as of the third quarter. That’s more than twice the GDP of 2015.

Its total outstanding debt amounts to roughly the global third-largest economy, Japan.

The next year will see the issuance of bonds by Chinese developers worth $92.3billion, according to Refinitiv Data. Nomura claims that the number of bond defaults has risen in recent quarters from 5.5 million yuan during 2020’s last quarter to 21.5 billion by mid-August.

EVERGRANDE

Evergrande, which was established in 1996 is a debtor of $300 billion. This amount is roughly equal to South Africa’s GDP. More than 1300 properties are owned by the developer in China’s 280 cities. Evergrande is the most indebted international developer with $19 billion of bonds issued on international capital markets.

PROPERTY SALES

    In 2020, sales of residential housing rose 3.2% to 1,549 million square metres from a year earlier, with sales by value up 10.8% to 15.5 trillion yuan, according to China’s statistics bureau. This compares to the 4.9 trillion Yuan 3.9 billion square metres that were sold in 2011.

China’s slowing property market in China began in 2021. The longest downtrend in construction started in 2015, with a drop in property sales.

HOME PRICES & INVENTORIES

China’s house prices have skyrocketed in the last decade. These prices vary widely across China, but they have risen 99% on average to 9,980 yuan/square metre by 2020, compared to 5,011 yuan back in 2011. Reuters calculations are based on statistics from the bureau.

    At the end of September, unsold inventories of homes stood at 224.2 million square metres, according to the statistics bureau – or roughly twice the size of the Channel Island of Jersey. At the end 2020, unsold inventories were 223.8 million square meters.

HOUSEHOLD LOANS

The latest data from China’s People’s Bank showed that household debts in foreign and domestic currency stood at 67.8 Trillion Yuan ($10.6 TILLION) as of the end of June.

($1 = 6.3983 renminbi)