China has “entered new development phase” post property

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Pantheon Economics gives us the rub:

Evergrande evades default for now, as it continues to sell assets at sizeable discounts, most recently its stake in a streaming services firm, sold at a 24% discount. The next test for the developer is a $255.2M coupon on December 28, which the $273M from this sale should help cover. But Q1 2022 then sees three additional coupon payments, before a £2.1B maturity in March, and another $1.5B due in April. Evergrande is not out of the woods yet, and nor are other developers.

Kaisa, another big beast, is trying to push back repayment of a $400M bond due December 7, and faces $2.8B in repayments in 2022. Smaller counterpart, Aoyuan, has reportedly defaulted on a trust product, in another sign of the contagion risks from property, though the firm has issued a denial. China’s trust sector had invested around RMB 1.7T in real estate as of June or about 13% of funds, per media reports. Yet for some trust companies, the exposure to real estate is over 50%. Total exposure is likely even higher, thanks to lending to firms in the property supply chain.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.