During the last quarter, it was a property developer that posted the best performance on the Hong Kong Stock Exchange: since October 31, 2022, Country Garden Holdings has gained 190%. The sector, however, is going through an unprecedented crisis, with real estate transactions falling 30.8% in December compared to 2021, according to China Real Estate information Corp, which examines the sales of China’s top 100 developers. This is the sixteenth month of decline. Investors’ enthusiasm stems from the hope that the worst is over and that the government will change its approach, moving from a campaign of strict regulation of the sector to a phase of support. However, experts warn against being overconfident.
In mid-December, the vice-prime minister, Liu He, in charge of the economy, had cheered the hearts of the promoters, by affirming that real estate constituted a “pillar” of the national economy. The sector, in fact, provides a quarter of the gross domestic product. On January 6, Housing Minister Ni Hong concurred, stating that ” China [allait] work to promote the recovery and stable development of the real estate market [en 2023] ».
This shift began in mid-November, when the People’s Bank of China (the central bank) released a sixteen-point plan in which it called for easier funding for healthy developers. Said plan was followed by promises made by major Chinese banks to release 3,190 billion yuan of credit (435 billion euros) for the sector.
Restoring household confidence
There was urgency. For a year and a half, Chinese real estate has been shaken by cascading defaults, following a debt reduction campaign that limits the financing possibilities of overly indebted developers. According to the Bloomberg news agency, promoters have missed at least 140 debt maturities in 2022 – which, in total, represents 50 billion dollars (46 billion euros) in default -, both on domestic and international markets. The most emblematic case is that ofEvergrandea giant in debt to the tune of $270 billion at the end of 2021. Today, local authorities are working to ensure the completion of abandoned Evergrande projects, as unfinished buildings have become the obsession of potential customers.
Beyond the announcement effects, the priority of the public authorities remains financial stability
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