China: real estate developer Shimao in default of payment
Shimao, a major real estate player in China, announced on July 4, 2022 that it could not repay a billion dollar loan.
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Text by: RFI Follow
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Promoter Shimao was unable to honor a refund worth more than $1 billion, or 981 million euros.
This payment default is the largest in China in the real estate sector since the beginning of the year.
It is a sign of difficulties that go beyond Shimao's case.
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The economic situation and the crisis linked to Covid-19 are the culprits designated by Shimao to explain his setbacks.
Real estate, long the engine of growth in China, is now penalized by the uncertainties weighing on household incomes.
Concretely, Shimao saw its sales fall back by 72% over one year during the first five months of the year and the promoter is hardly optimistic for the weeks, the months to come.
Shimao warns: the phenomenon is
set to “continue in the short term
”.
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To read also: China: the Central Bank lowers one of its reference interest rates to revive real estate
Beyond sales, the sector is having difficulty obtaining financing.
Even though real estate and construction weigh more than a quarter of China's GDP, in recent years Beijing has tightened the conditions for access to credit for developers to reduce their indebtedness.
As a result, many groups find themselves short of cash.
This is the case of Evergrande.
The poor health of the number one therefore penalizes, in turn, its competitors.
Buyers are increasingly reluctant to invest in stone.
In May, another heavyweight, Sunac, announced a payment default.
Some promoters are so desperate that they come, according to the local press, to accept payment in agricultural products.
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