Longer term readers may recall that in 2011/12, a string of Chinese developers faced a deteriorating feedback loop of falling sales and rising debt costs from loan sharks that threatened to dump stock onto Chinese housing markets and crash prices. Of course, authorities relented then and allowed a new cycle to bloom but the problem is now back. Via Forexlive:
China Securities Journal says in a front page editorial(via MNI, with thanks):
- Chinese property developers are facing liquidity problems
- Expected they will face more difficulties accessing bank loans in the second half of this year and in 2015 as banks tighten lending further
- Says many small- and medium-sized developers have had to borrow via private lending at very high interest rates
- Slowing property sales have not been able to support such high funding costs, which could result in more frequent breaks in the liquidity chain in the second half among these small- and medium-sized developers
I short, expect rising default risk in the second half.
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