Tough year looms as China's real estate developers face record wall of debt

Beijing

FOR China's highly leveraged real estate developers, 2017 could be the year that the borrowing binge finally catches up with them.

Regulators have choked off a key source of funding, with the Shanghai Stock Exchange raising the threshold for property firms to sell bonds on their platform in October. Since then, builders haven't sold any notes in a market that played host to about 40 per cent of their onshore debentures over the past two years, data compiled by Bloomberg show. The curbs couldn't have come at a worse time, with a record US$17.3 billion of developer bonds due next year, and another US$27.9 billion in 2018.

China's government is treading a fine line with the curbs on debt issuance as it tries to gently deflate the real-estate bubble while avoiding wider fallout in an industry that accounts for as much as 20 per cent of Asia's largest economy, according to Bloomberg Intelligence estimates. The sector is also threatened by a broader increase in funding costs, with the yield premium on AAA-rated domestic corporate notes reaching the widest since July 2015, amid a global …