Chinese Real Estate Companies to Go Bankrupt as Housing Bubble Pops

( – As struggling real estate developers in China look for a government bailout, the Chinese government is saying no.

China’s Minister of Housing and Urban-Rural Development Ni Hong stated that “seriously insolvent” developers must either go bankrupt or restructure their businesses. He added that the developers that have committed “acts that harm the interests” of the people will be “investigated and punished” as allowed under law.

The March 9th comments from Ni come as one of the country’s largest real estate developers, Evergrande, has almost entirely collapsed. In 2017, the company was worth $50 billion. However, in 2020, after the Chinese government began to stop debt financing for the country’s property developers, the company started to fail. The company ran out of money to finish building apartments that buyers had paid for in advance, and, as a boycott, some buyers also stopped paying their mortgages, causing the company to fall further behind. A Hong Kong court is now liquidating Evergrande.

In February, another large real estate developer in China, Country Garden, missed a $200 million debt payment.

Twelve big banks, including six of the largest state-owned lenders, are in talks to provide another real estate developer, Vanke, with a loan worth up to $11.2 billion so that the company can meet its upcoming repayment deadlines, according to a March 12 report from Chinese state media.

During the press conference held on March 9th alongside the annual parliamentary meetings in China, Ni focused on “people’s livelihoods.” The focus of the meetings was not the real estate sector but, instead, the focus was on housing sales and how authorities would promote developing affordable housing.

The comments echoed those of Premier Li Qiang, who said in his government work report that China would be moving quickly to create “a new development model for real estate.” He said the country would “improve the basic systems for commodity housing” and be working to build up its “supply of government-subsidized housing.”

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