Amid China’s economic crisis, around 233 asset developers filed for bankruptcy last year, Taiwan News reported that it mentioned the China Real Estate Association. According to the report, the highest number of programs won was in Zhejiang Province with 36 cases, accounting for 15. 45% of the national total. Hunan and Guangdong provinces rank second and third, respectively.
The report stated that the number of bankruptcies for 2023 was the lowest since 2020. As many as 408 home developers filed for bankruptcy in 2020, the first year of the Covid-19 pandemic, 343 in 2021, and 308 in 2022. The economic downturn caused home developers in third- and fourth-tier cities to suffer the most. Even so, the overall impact of bankruptcies is expected to be limited, according to the report.
China-based CRIC Securities’ research department indicated that home sales in China continued to dwindle in 2023 and challenges would persist in 2024 despite favorable policies. Low consumer confidence and inventory overhang means China’s housing market could remain sluggish for a long while. Earlier last year, a US-based news daily reported that the construction sites around China appear visibly less busy and construction of apartment towers has faltered because of falling apartment prices.
Quoting data released for prices of new apartments in 70 large and medium-sized cities across China, Goldman Sachs calculated that prices fell in August at a seasonally adjusted annual rate of 2.9 per cent, compared with 2.6 per cent in July. Moreover, the data shows that new apartments considerably understate the speed and extent of price declines, however, as local governments have put heavy pressure on developers not to cut prices.
Prices for existing homes in 100 cities in China fell an average of 14 percent in early August from their peak two years earlier, according to the Beike Research Institute, a Tianjin-based research firm. Rents fell as much as five percent. In addition, China’s banking sector is also suffering from debt payments from defaulters, with loans made through banks to assets that develop in line with defaulters.
According to the New York Times, the main impediment to the rapid repayment of defaulters’ loans is the implication of loans to local governments and their monetary subsidiaries. Earlier, the central bank, the People’s Bank of China, announced that it would allow banks to set aside smaller reserves and start lending more. The move was widely noted as aimed at accommodating a giant amount of bonds that local and provincial governments will factor in to finance their infrastructure projects, the New York Times reported. (ANI)
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