China builders have US$292b of debt coming due through 2023

CHINA'S debt-saddled property sector has at least US$292 billion of onshore and offshore borrowings coming due through the end of 2023, raising the spectre of mounting payment pressure following this year's record wave of defaults.

There's US$53.7 billion in borrowings still due for the rest of 2022, followed by US$72.3 billion of maturities in the first quarter of next year. The figures include onshore and offshore bonds and loans as well as domestic trust loans according to data compiled by Bloomberg and research firm Use Trust.

"If we draw parallels from 2022, a lot of the stress began because of the seasonality of payments towards the first quarter," according to Henry Loh, head of Asia fixed income at abrdn. "So undoubtedly, the payment pressure in the first quarter of 2023 will add more stress to what is already a challenging environment."

There are some signs of relief, though. For all of 2023, maturities so far total US$238 billion, down about 25 per cent from the amount for all of this year, lower still from the peak of US$381 billion in 2021. But deteriorating cash flow means "more payment pressure will be felt by real estate firms next year than this year", said Li Kai, founding partner of Beijing Shengao Fund Management.

The country's property sector, estimated to account for nearly a quarter of China's economy, has been suffering for more than a year from a debt crisis that began with a regulatory crackdown on leverage growth. China's offshore high-yield bond market, which is dominated by developers, has fallen into unprecedented distress as defaults spiked and new-home sales slumped.

Such notes have lost 42 per cent this year, according to a Bloomberg index, including 11 per cent for October in one of the market's biggest-ever monthly drops.

The recent declines have stemmed in part from disappointment about a key programme to boost selected developers' liquidity. CIFI Holdings Group. last month defaulted on a convertible bond coupon soon after selling a state-guaranteed onshore note. Another such issuer, Longfor Group Holdings, saw the biggest-ever declines in its shares and dollar bonds on Monday (Oct 31) after announcing the resignation of its chairwoman. BLOOMBERG

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