Beyond Evergrande, China’s Property Market Faces a $5 Trillion Reckoning

As many economists say China enters what is now the final phase of one of the biggest real-estate booms in history, it is facing a staggering bill: According to economists at Nomura, $ 5 trillion plus loans that developers had taken at a good time. Holdings Inc.

The debt is almost double that at the end of 2016 and last year exceeded the overall economic output of Japan, the world’s third-largest economy.

With warning signs on the debt of nearly two-fifths of growth companies borrowed from international bond investors, global markets are poised for a potential wave of defaults.

Chinese leaders are getting serious about addressing debt by taking a series of steps to curb excessive borrowing. But doing so without hurting the property market, crippling more developers and derailing the country’s economy is turning into one of the biggest economic challenges for Chinese leaders, and one that resonates globally when mismanaged. could.

Luxury Developer Fantasia Holdings Group Co. It failed to pay $206 million in dollar bonds that matured on October 4. In late September, Evergrande, which has more than $300 billion in liabilities, missed two interest-paying deadlines for the bond.

A wave of sell-offs hit Asian junk-bond markets last week. On Friday, bonds of 24 of 59 Chinese growth companies on the ICE BofA Index of Asian Corporate Dollar Bonds were trading at over 20% yields, indicating a high risk of default.

Some potential home buyers are leaning, forcing companies to cut prices to raise cash, and could potentially accelerate their slide if the trend continues.

According to data from CRIC, a research arm of property services firm e-House (China) Enterprise Holdings, overall sales among China’s 100 largest developers were down 36 per cent in September from a year earlier. Ltd.

It revealed that the 10 largest developers, including China Evergrande, Country Garden Holdings Co. and china wenke Co., saw a decline of 44% in sales compared to a year ago.

Economists say most Chinese developers remain relatively healthy. Beijing has the firepower and tighter control of the financial system needed to prevent the so-called Lehman moment, in which a corporate financial crisis snowballs, he says.

In late September, Businesshala reported that China had asked local governments to be prepared for potentially intensifying problems in Evergrande.

But many economists, investors and analysts agree that even for healthy enterprises, the underlying business model—in which developers use credit to fund steady churn of new construction despite the demographic less favorable for new housing—is likely to change. Chances are. Some developers can’t survive the transition, he says.

Of particular concern is some developers’ practice of relying heavily on “presales”, in which buyers pay upfront for still-unfinished apartments.

The practice, more common in China than in the US, means developers are borrowing interest-free from millions of homes, making it easier to continue expanding but potentially leaving buyers without ready-made apartments for developers to fail. needed.

According to China’s National Bureau of Statistics, pre-sales and similar deals were the region’s biggest funding sources since August this year.

“There is no return to the previous growth model for China’s real-estate market,” said Hous Song, a research fellow at the Paulson Institute, a Chicago think tank focused on US-China relations. China is likely to put a set of limits on corporate lending, known as the “three red lines” imposed last year, which helped trigger the recent crisis on some developers, he added. That China can ease some other restrictions.

While Beijing has avoided explicit public statements on its plans to deal with the most indebted developers, many economists believe leaders have no choice but to keep the pressure on them.

Policymakers are determined to reform a model fueled by debt and speculation as part of President Xi Jinping’s broader efforts to mitigate the hidden risks that could destabilize society, especially at key Communist Party meetings next year. before. Mr. Xi is widely expected to break the precedent and extend his rule to a third term.

Economists say Beijing is concerned that after years of rapid home price gains, some may be unable to climb the housing ladder, potentially fueling social discontent, as economists say. The cost of young couples is starting to drop in large cities, making it difficult for them to start a family. According to JPMorgan Asset Management, the median apartment in Beijing or Shenzhen now accounts for more than 40 times the average family’s annual disposable income.

Officials have said they are concerned about the risk posed by the asset market to the financial system. Reinforcing developers’ business models and limiting debt, however, is almost certain to slow investment and cause at least some slowdown in the property market, one of the biggest drivers of China’s growth.

The real estate and construction industries account for a large portion of China’s economy. Researchers Kenneth S. A 2020 paper by Rogoff and Yuanchen Yang estimated that industries, roughly, account for 29% of China’s economic activity, far more than in many other countries. Slow housing growth could spread to other parts of the economy, affecting consumer spending and employment.

Government figures show that about 1.6 million acres of residential floor space were under construction at the end of last year. This was roughly equivalent to 21,000 towers with the floor area of ​​the Burj Khalifa in Dubai, the tallest building in the world.

Housing construction fell by 13.6% in August below its pre-pandemic level, as restrictions on borrowing were imposed last year, calculations by Oxford Economics show.

Local governments’ income from selling land to developers declined by 17.5% in August from a year earlier. Local governments, which are heavily indebted, rely on the sale of land for most of their revenue.

Another slowdown will also risk exposing banks to more bad loans. According to Moody’s Analytics, outstanding property loans—mainly mortgages, but also loans to developers—accounted for 27% of China’s total of $28.8 trillion in bank loans at the end of June.

As pressure on housing mounts, many research houses and banks have cut China’s growth outlook. Oxford Economics on Wednesday lowered its forecast for China’s third-quarter year-on-year GDP growth from 5% to 3.6%. It lowered its 2022 growth forecast for China from 5.8% to 5.4%.

As recently as the 1990s, most city residents in China lived in monotonous residences provided by state-owned employers. When market reforms began to transform the country and more people moved to cities, China needed a massive supply of high-quality apartments. Private developers stepped in.

Over the years, he added millions of new units to modern, streamlined high-rise buildings. In 2019, new homes made up more than three-quarters of home sales in China, less than 12% in the US, according to data cited by Chinese property broker Kei Holdings Inc. in a listing prospectus last year.

In the process, developers grew to be much bigger than anything seen in the US, the largest US home builder by revenue, DR Horton. Inc.,

Reported assets of $21.8 billion at the end of June. Evergrande had about $369 billion. Its assets included vast land reserves and 345,000 unsold parking spaces.

For most of the boom, developers were filling a need. In recent years, policymakers and economists began to worry that much of the market was driven by speculation.

Chinese households are prohibited from investing abroad, and domestic bank deposits provide low returns. Many people are wary of the country’s booming stock markets. So some have poured money into housing, in some cases buying three or four units without the intention of buying or renting them out.

As developers bought more places to build, land sales boosted the national growth figures. Dozens of entrepreneurs who founded growth companies are featured on the list of Chinese billionaires. Ten of the 16 soccer clubs of the Chinese Super League are wholly or partially owned by the developers.

Real-estate giants borrow not only from banks but also from shadow-banking organizations known as trust companies and individuals who invest their savings in investments called wealth-management products. Overseas, they became a mainstay of international junk-bond markets, offering juicy produce to snag deals.

A builder, Kaisa Group Holdings Ltd. , defaulted on its debt in 2015, was still able to borrow and later expand. Two years later it spent the equivalent of $2.1 billion to buy 25 land parcels, and $7.3 billion for land in 2020. This summer, Cassa sold $200 million of short-term bonds with a yield of 8.65%.

By: Quentin Webb & Stella Yifan Xie 

Source: Beyond Evergrande, China’s Property Market Faces a $5 Trillion Reckoning – WSJ

.

Related Contents:

 

The Future of Travel in the Covid-19 Era

1

After being shut down for nearly a year and a half, international travel has started to pick up again, with countries in the Caribbean, Africa, and Europe paving the way. The reopening of borders has been far from straightforward as the world negotiates inequities in Covid-19 containment, vaccine access, and economic recovery. And everything can change in an instant.

For airlines, airports, cruise lines, and hotels, the new normal is increasingly looking like the old normal; While advanced cleaning protocols are (happily) here to stay, social distancing and even mask requirements have started to peel away. A lack of cohesive guidelines from governing authorities mean that protocols are being patched together by individual properties and companies, leaving consumers to wade through fine print and determine what fits their risk thresholds.

If the wealthiest initially set the tone for the future of nonessential travel, the masses are now unleashing a storm of pent-up demand that has caused prices to multiply and availability to evaporate. Compounding those issues are labor shortages in many popular vacation destinations, already slim inventory gobbled up by last year’s cancelations, and a hampered import market that’s making it impossible to get a rental car or wrap up that hotel renovation. Consumers may feel safe traveling again, but it’s going to be a bumpy rebound.

Those of us who remain stuck in place can still daydream. According to the National Institutes of Health, simply planning a trip can spark immeasurable joy—and there’s high hope that the ongoing challenges of availability and border restrictions will iron themselves out by 2022. Getting into an adventurous frame of mind can remind us of the power of travel—not only in the billions of dollars in daily economic activity but also to forge cross-cultural connections and bring us closer to those we love.

By The Numbers

  • $150 million The amount of cash U.S.-based airlines were losing on a daily basis as of March 2021.
  • 1.2 million Average increase of daily travelers passing through TSA checkpoints in June 2021, compared to June 2020. The number still represents roughly a 30% decline from 2019 figures.
  • 67 Percentage of people who would feel confident traveling once vaccinated.

Why It Matters

It’s not just your vacation or business trip that’s on the line. The travel industry customarily accounts for 10% of the global economy, rippling to the remotest corners of the world. Each trip a person takes sets off a domino effect of consumption that directs dollars to airlines, hoteliers, restaurateurs, taxi drivers, artisans, tour guides, and shopkeepers, to name a few. In all, the tourism industry employs 300 million people. Especially in developing countries, these jobs can present pathways out of poverty and opportunities for cultural preservation.

In 2020, the pandemic put a third of all tourism jobs at risk, and airlines around the world said they needed as much as $200 billion in bailouts. By December, the World Tourism Organization had tallied $935 billion in global losses from the tourism standstill, and was estimating that the ripple effects would result in a total economic decline exceeding $2 trillion. Even with international tourism now cautiously reopening, the organization expects that the world will not return to 2019 tourism levels until 2023.

According to data from the World Travel and Tourism Council, every 1% increase in international arrivals adds $7.23 billion to the world’s cumulative gross domestic product. Any improvement in this sector is significant—and it’s just beginning.

Americans, who have easy access to vaccines and command an overwhelming share of the international travel market, are back on the road; two-thirds intend to take a trip in 2021. In the U.S., flight capacity has climbed back to 84% of 2019 levels. The questions are what it will take for the rest of the world to catch up and how the industry must evolve to be flexible at handling future Covid-19 variants so travelers will feel safe and willing to spend.

Grounded for many months, airlines are beefing up their summer schedules—though the number of flights will be a fraction of their pre-pandemic frequency. Airports are still mostly ghost towns (some have even been taken over by wildlife), and international long-distance travel is all but dead. Around the globe, the collapse of the tourist economy has bankrupted hotels, restaurants, bus operators, and car rental agencies—and thrown an estimated 100 million people out of work.

With uncertainty and fear hanging over traveling, no one knows how quickly tourism and business travel will recover, whether we will still fly as much, and what the travel experience will look like once new health security measures are in place. One thing is certain: Until then, there will be many more canceled vacations, business trips, weekend getaways, and family reunions.

Travel will normalize more quickly in safe zones that coped well with COVID-19, such as between South Korea and China, or between Germany and Greece. But in poorer developing countries struggling to manage the pandemic, such as India or Indonesia, any recovery will be painfully slow.

All this will change the structure of future global travel. Many will opt not to move around at all, especially the elderly. Tourists who experiment with new locations in their safe zones or home countries will stick to new habits. Countries with strong pandemic records will deploy them as tourism marketing strategies—discover Taiwan! Much the same will be true for business, where ease of travel and a new sense of common destiny within each safe zone will restructure investment along epidemiological lines.

With the support of IATA and others, the International Civil Aviation Organization developed a global restart plan to keep people safe when traveling. Restart measures will be bearable for those who need to travel, with universal implementation the priority. It will give governments and travelers the confidence that the system has strong biosafety protections. And it should give regulators the confidence to remove or adjust measures in real time as risk levels change and technology advances.

Contributors: Nikki Ekstein

Source: The Future of Travel in the Covid-19 Era – Bloomberg

.

Critics:

The COVID-19 pandemic has impacted the tourism industry due to the resulting travel restrictions as well as slump in demand among travelers. The tourism industry has been massively affected by the spread of coronavirus, as many countries have introduced travel restrictions in an attempt to contain its spread. The United Nations World Tourism Organization estimated that global international tourist arrivals might decrease by 58% to 78% in 2020, leading to a potential loss of US$0.9–1.2 trillion in international tourism receipts.

In many of the world’s cities, planned travel went down by 80–90%.Conflicting and unilateral travel restrictions occurred regionally and many tourist attractions around the world, such as museums, amusement parks, and sports venues closed. UNWTO reported a 65% drop in international tourist arrivals in the first six months of 2020. Air passenger travel showed a similar decline. The United Nations Conference on Trade and Development released a report in June 2021 stating that the global economy could lose over US$4 trillion as a result of the pandemic.

References

Canada Launches C$2,000 Mandatory Hotel Quarantine For All Arrivals

Countries are responding to the threat of new variants of Covid-19 in different ways, but many are introducing the idea of mandatory quarantine in government-designated hotels to ensure that restrictions are met.

Canada is the latest to do so, with prime minister Justin Trudeau announcing Friday that all arrivals into the country would be affected.

Speaking outside Rideau Cottage in Ottawa on Friday, Trudeau announced that starting next week, all international passenger flights must land at the following four airports: Vancouver, Toronto, Calgary and Montreal.

PROMOTED Grads of Life BrandVoice | Paid Program Tapping Into America’s Best-Kept Future Of Work Secret UNICEF USA BrandVoice | Paid Program How To Create An Equitable World For Every Child: UNICEF USA’s Advocacy Priorities For 2021 And Beyond Civic Nation BrandVoice | Paid Program Our School Is Not Complete Without You

Mandatory PCR testing (using a nasal swab) will be introduced at these four Canadian airports for people returning to Canada–this is in addition to the pre-boarding tests that travelers are required to take before they can fly.

Trudeau said, “travelers will then have to wait for up to three days at an approved hotel for their test results, at their own expense, which is expected to be more than $2,000 (US$1,500).”

The government believes this will discourage people from traveling or taking a holiday when they know they must pay for a hotel stay in quarantine upon their return. MORE FOR YOU Why Huawei’s New Update Is Seriously Bad News For Android UsersWhatsApp Users Suddenly Get This Surprise New Boost From FacebookHuawei’s Striking New Billion-Dollar Gamble Targets Apple, Google (And Tesla)

Trudeau added (quoted in The Guardian) that “those with negative test results will then be able to quarantine at home under significantly increased surveillance and enforcement.”

Dr Theresa Tam, Canada’s chief public health officer said that the high cost was due to the fact that these facilities had to provide prevention control measures, food, security and PCR testing. She also added that returning passengers had to also take another PCR test ten days after arrival.

Trudeau is also reinforcing measures at Canada’s land borders. “We will also, in the coming weeks,” Trudeau said, “be requiring nonessential travelers to show a negative test before entry at the land border with the US, and we are working to stand up additional testing requirements for land travel.”

The government said that all main carriers have agreed to suspend flights to Mexico and Caribbean destinations until 30 April.

Alex Ledsom

By: Alex Ledsom

I have lived in Provence ever since I exchanged my London city life for the south of France. I have a background in research, business and finance.

.

Global News

As travel measures begin to take effect starting Sunday to discourage non-essential travel out of Canada, people are rushing to book flights to try and return home. But as the country is set to implement a mandatory three-day quarantine at a hotel at the expense of returning travellers, it has people worried they could be left with a costly bill. Mike Drolet reports. For more info, please go to https://globalnews.ca/news/7590341/co…​ Subscribe to Global News Channel HERE: http://bit.ly/20fcXDc​ Like Global News on Facebook HERE: http://bit.ly/255GMJQ​ Follow Global News on Twitter HERE: http://bit.ly/1Toz8mt​ Follow Global News on Instagram HERE: https://bit.ly/2QZaZIB#GlobalNews#COVID19#coronavirus

.

More Contents:

Qualtrics, SLC Plan, Prison Restrictions, and a LOT More (Week of Jan. 25-31) – Deseret Business Watch davidpolitis.substack.com – February 1[…] #saliva #test #testing #baseball #mlb #majorleaguebaseball #dalemurphy #catfishing #utah #business #businessnews #news #utahbusiness #businessinutah #siliconslopes We welcome your thoughts, comments, and/o […]0

Business People: Delta Air Lines taps Mayo exec to oversee health operations – http://www.twincities.com – January 31[…] EMAIL ITEMS to businessnews@pioneerpress […]N/A

Latest Forex News and Trading Updates | Doo Prime http://www.dooprime.com – January 31[…] Awards Service AtoZmarkets Donation Hubei PPE DailyNews DailyHeadlines TECH BusinessNews ForexTrading BenefitsofForexTrading WhyTradeForex Investment Analytics Partnership AnalystView […]345

VODAFONE IDEA SHARE LATEST NEWS��VODAFONE IDEA SHARE��VODAFONE IDEA TARGET��VODAFONE IDEA��BUSINESSNEWS, http://www.youtube.com – January 31N/A

Post-pandemic: Are Nigerians prepared for the future of work? digitalskeleton.com.ng – January 31[…] BusinessNews Update1

UAE approves law granting citizenship to investors, professionals alternativeafrica.com – January 31BUSINESSNEWS NOWWORLD Home›Business›UAE approves law granting citizenship to investors, professionals UA […]2

Toys R Us retrenches again, shutters its last 2 US stores thegrio.com – January 30BusinessNews Toys R Us retrenches again, shutters its last 2 US stores The moves come as physical stores […]1

The Ugly Truth About bodybuilding lunch – On Management education & Development issues efmd.blogactiv.eu – January 29[…] PDF Download Summary: DotCom Secrets: Review and Analysis of Brunson s Book Read Online by BusinessNews Publishing […] PDF Download Summary: Scale: Review and Analysis of Hoffman and Finkel s Book Full Download by BusinessNews Publishing […]0

Find Out Now, What Should You Do For Fast abs workout bodybuilding? – On Management education & Development issues efmd.blogactiv.eu – January 29[…] PDF Download Summary: DotCom Secrets: Review and Analysis of Brunson s Book Read Online by BusinessNews Publishing […] PDF Download Summary: Scale: Review and Analysis of Hoffman and Finkel s Book Full Download by BusinessNews Publishing […]0

Morning Business News: जानिए Monthly Expiry के दिन नज़र रखने http://www.phuketnews.easybranches.com – January 29[…] जानिए MONTHLY EXPIRY के दिन नज़र रखने वाली अहम बातें | MORNING CALL ShareMarketLive #CNBCAwaazLive #BusinessNews #StockMarket #ShareMarketStrategy Share Market में भारी गिरावट देखने को मिली है […] 04:10:16 3 days ago Views 3,601 By: CNBC Awaaz A+ A- 35 Shared ShareMarketLive #CNBCAwaazLive #BusinessNews #StockMarket #ShareMarketStrategy Share Market में भारी गिरावट देखने को मिली है […]0

Walgreens names Rosalind Brewer as CEO thegrio.com – January 28BusinessNews Walgreens names Rosalind Brewer as CEO This career power move will make Brewer the only Black woman […]1

Bank Of India Allowed To Auction Former Moi’s Aide Hosea Kiplagat Property sonkonews.com – January 27Home Business BusinessNews Bank Of India Allowed To Auction Former Moi’s Aide Hosea Kiplagat Property By Lutta Njomo Januar […]4

Rosanna J Head MCIPR on LinkedIn: Welcome! You are invited to join a lunchtime webinar: Tessa McCann http://www.linkedin.com – January 26Just booked a spot on the CIPR – Chartered Institute of Public Relations Corporate and Financial Group Webinar – with ‘Tessa McCann, News Editor for Strategic Relationships at CNBC International’. Also worth 5 CPD Points. #CIPR #cpdpoints #PRNetwork #Freelancer #CorporateCommunications #FinancialPR #BusinessNews #BusinessAgenda Like Comment Share To view or add a comment, sign in To view or add a comment, sign in 1,249 followers 582 Posts 2 Articles View Profile FollowN/A

Eversource helps customers manage energy costs with new usage monitoring tools hk-now.com – January 26Home Business Eversource helps customers manage energy costs with new usage monitoring tools BusinessNews Eversource helps customers manage energy costs with new usage monitoring tools By Sharon Challenger […]0

#Businessnews #news Startup of India, Startups, funding, business news and many more. http://www.youtube.com – January 250

Serpent Consulting Services Pvt Ltd – serpentcs.medium.com – January 25[…] com/serpentcs-what-s-new-in-odoo-v14-community-edition-part-1-493 #OdooExperience2020 #businessnews #businesstips #odoo14 #OpenSource #ERP #india #serpentcs #odoo #gold #partner https://t […]N/A

Redirecting to Baker Hughes awarded Iraqi Gas Processing Contract | Iraq Daily Journal iraqdailyjournal.com – January 24[…] iraq-businessnewsN/A

Digital Marketing Experts India – Net मित्र News Channel 29 Jan 2021 Episode 6 http://www.meetup.com – January 23[…] Zaveri WhatsApp [masked] #news #socialmediatips #livestreaming #jyotindrazaveri #krantishah #businessnews #digitalmarketingtips #collaborate #facebooklive #Netमित्रNewsChannel #digitalmarketin […]1

VODAFONE IDEA SHARE LATEST NEWS��VODAFONE IDEA SHARE��VODAFONE IDEA TARGET��VODAFONE IDEA��BUSINESSNEWS, http://www.youtube.com – January 230

Byron Allen buys TV station in Hawaii, donates $100K to Feeding America thegrio.com – January 22BusinessNews Byron Allen buys TV station in Hawaii, donates $100K to Feeding America The media mogul an […]1��

Twitter Locks Out Chinese Embassy in U.S. Over Post on Uighurs http://www.linkedin.com – January 22[…] history And more… #latestnews #businessnews #trendingnews #Newsletter #BuzzFeed #Twitter #ChineseEmbassy #OAN #ConspiracyTheories #AmandaGorman […]0

BL Medien http://www.blmedien.de – January 21[…] Read the magazine online The magazine Subscribe Current businessnews Media information Magazine-archive Reference person Contact The magazine IDM International Dair […] Middle East   Frequency: bi-monthly, first copy to be released in November 2008 Subscribe Current businessnews Media information IDM International Dairy Magazine   Thank you for your interest in the medi […]N/A

Port of Tripoli selected as terminal by CMA CGM | Beirut Business Report beirutbizreport.com – January 21[…] businessnews0

What Is meal bag for bodybuilding and How Does It Work? – My blog http://www.danjur.com – January 21[…] PDF Download Summary: DotCom Secrets: Review and Analysis of Brunson s Book Read Online by BusinessNews Publishing […] PDF Download Summary: Scale: Review and Analysis of Hoffman and Finkel s Book Full Download by BusinessNews Publishing […]N/A

2021: an opportunity to increase disability employment retailpharmacymagazine.com.au – January 21BusinessNews January 21, 2021 2021: an opportunity to increase disability employment With job advertisement […]