China state council met real estate developers, banks midst liquidity crisis in China’s property sector

As per a source with direct knowledge, a think-tank of China’s powerful state council met banks and real estate developers in Shenzhen city midst intensifying worries liquidity crisis facing China’s property sector.

The meeting, held yesterday, included participants from China Vanke, Ping An Bank, Kaisa Group, China Construction Bank, China Citic Bank, and CR Trust, said the source.

Investors are increasingly concerned of liquidity woes spreading in China’s property sector, following a string of offshore debt defaults, credit rating downgrades and sell-offs in some developers’ shares and bonds in recent weeks.

Global markets have been rattled by China Evergrande Group, which is at the center of the crisis, as it grapples with liabilities of more than $300 billion, which could pose systemic risks to Beijing’s financial system.

According to the source, Shenzhen-based Kaisa urged state companies to “help private firms improve liquidity through project acquisitions and strategic buys”.

The source went on to add, Kaisa, China’s 25th largest developer by sales, has stated that it is facing a tight liquidity and is facing significant difficulties after its rating was downgraded following curbing of loans by banks.

According to Kaisa, some financial institutions had transferred funds out of its accounts inappropriately and it urged all lawsuits seeking a freeze of its assets to be handled centrally in a Shenzhen court.

In a statement on its official WeChat account Kaisa said, it was taking measures to solve its liquidity issues and was consulting investors in wealth management products about better payment solutions.

After Evergrande, Kaisa has the biggest offshore debt of any Chinese developer.

Incidentally, many holders of Evergrande’s offshore bonds had not received interest payments that was due on November 6 by Monday evening in Asia. 

In October, Evergrande narrowly missed catastrophic defaults on its $19 billion worth of bonds in international capital markets by paying coupons just before the expiration of their grace periods.

One such bond worth more than $148 million, expires on Wednesday, November 10.

Evergrande is also due to make coupon payments totaling more than $255 million on its June 2023 and 2025 bonds on December 28.

With the news reaching the market, Evergrande’s shares fell more than 1% on Tuesday.

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