This may include adverts from us and 3 rd parties based on our understanding. Economists are keeping a watchful eye on China since Evergrande, one of the country's biggest property developers, have been struggling with more than $300 billion of debts. The company received a 30 day grace period and managed to pay $83.5 million in interest on an offshore dollar bond this week, but could be officially in default by the end of October.
Evergrande have $42.5 million in interest due at the end of the month on top of several late payments. Now other companies of the same market are following suit with huge amounts of debts that could wreak havoc within the Chinese real estate sector. According to experts, China owes around 30% of its economy to real estate. A great many Chinese developers are in more fragile positions than their balance sheets might suggest, said Craig Botham, chief China economist at Pantheon Macroeconomics.
Indeed, property developers like Fantasia assured their investors that they had no liquidity issue. But at the same time, they failed to pay a $206 million dollar bond in early October, proving their ongoing crisis. Evergrande-related stress has slowed sales in the property sector and driven up borrowing costs, adding pressure on developers like Fantasia, Sinic and China Properties Group. The yield on riskier Chinese dollar bonds - which are big sources of funding for developers - soared to 20% earlier this month. READ MORE: Putin and Xi Jinping in joint naval patrol to West with stark warning to Russia and Xi Jinping.
The real estate crisis could have a bigger impact on the rest of China as predicted by a bank analyst from UBS. In a note, they say they expect new property starts to tumble 20% year-on-year in the fourth quarter, bringing further downward pressure on the economy. Struggling companies have been identified by rating agencies such as Fitch, which gave Xinyuan Real Estate a downgraded CC score this week. Fitch said the mid-sized developer faces a tight liquidity situation, with large funding access and weak offshore bond maturities in the next twelve months.