China’s property developers have more than big bond payments coming up
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A scaffold was built by migrants at Huayang Commercial City Phase 2 in Huai’an City (east China’s Jiangsu Province), February 7, 2021.
Costfoto | Barcroft Media | Getty Images
BEIJING — China’s struggling real estate developers face a growing number of repayment deadlines in the next few months.
Real estate giant China EvergrandeFinally defaulted earlier this monthHowever, it did not immediately ignite the widespread acceptance of this idea. contagion that global investors had worried about.However, the industry will continue to face increasing amounts of bills and debt in the coming months.
Chinese developers could face $19.8 billion of maturing offshore U.S. Dollar denominated bonds over the first quarter and $18.5 billion for the second quarter, according to Nomura analyst Ting Lu and Jing Wang.
The analysts stated in a Tuesday note that the amount for the first quarter is almost double what the $40.2 billion was in maturity in the fourth.
If the U.S. dollar is stable at 6.4 Chinese dollars, analysts estimate that the number of maturing bonds will be 191 Billion Yuan ($29.84Billion) in fourth quarter. That compares with 210 Billion in the first quarter and 209 Billion in the second.
“However, in view of potential RMB depreciation pressures and surging offshore funding costs amid rising credit defaults, we believe the repayment pressure for developers in the offshore bond markets could be even higher,” the Nomura analysts said.
In recent weeks, the yuan (also called the Renminbi, or RMB) has seen a strong performance against the greenback to trade at 6.37 Yuan per U.S. Dollar.
Fitch Ratings indicated that it expected the yuan’s weakness due to the decline in Chinese exports and the divergence between China and the U.S. monetary policy. In the United States, Federal Reserve signaled that it has been signaling and the People’s Bank of China had lowered certain key rates within the past week. more aggressive removal of stimulus.
Fitch analysts reported Thursday that Fitch expected the Yuan to fall to 6.7 against the U.S. Dollar by the end next year.
Wages for migrant workers
Nomura analysts highlighted another deadline that Chinese developers of real estate are facing: deferred wages due for construction workers. These payments must be made before January 31st.
Analysts stated, “Unlike most other sectors,” that construction pays the bulk of migrants’ annual salaries right before each lunar year ends. According to our informal survey deferred wages make up around half of workers’ annual salaries.
Analysts estimate that private developers owe construction workers a total of 1.1 trillion Yuan in deferred salaries. The report noted that paying these construction workers in time is especially critical for developers this time around since the central government has emphasized that stability — including social stability — is a priority next year.
The analysts stated, “Failing pay of deferred salaries could lead to severe sanctions from the central government and the relevant local governments,” and that developers and contractors who cannot pay wages on time are at great risk, especially when social protests start.”
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