Chinese Economics Thread

Wrought

Wrought

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Offshore lenders have not recovered the overwhelming majority of their debts in the property sector.

International bondholders have recovered less than 1 per cent of nearly $150bn of bonds defaulted on by China’s property developers since 2021, despite years of negotiations and nearly a dozen restructuring agreements. Just $917mn in cash has been transferred to investors in offshore bonds across 62 developers in that period, according to an analysis of restructuring data from Debtwire, equivalent to 0.6 per cent of the $147bn in defaults recorded. Only three developers — China Fortune Land Development, China South City and RiseSun Real Estate Development — have made any cash coupon payments across 11 restructuring agreements for $39bn in debt, as mainland
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businesses struggle to generate income.
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This should not come as a surprise, seeing as onshore debts are the main problem and focus. Restructuring continues, albeit slowly.

“Everyone’s just thrown in the towel,” said Debtwire analyst Dominic Soon. “The main problem is really the onshore debt. Without solving that, there’s almost no money that can come out.” The offshore bonds are dwarfed by debts in the mainland, which pose a much graver challenge to policymakers as they seek to stabilise an economically critical sector. Total developer liabilities were $12tn, according to a 2023 estimate by the National Bureau of Statistics. Debtwire’s Soon suggested restructuring developments in the mainland were lagging those in Hong Kong by several years.
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Wrought

Wrought

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Speaking of restructuring, NPL writeoffs continue at the largest banks.

China’s financial industry disposed of a record 3.8 trillion yuan ($532 billion) in bad assets in 2024, according to the banking regulator. While the official data didn’t give a sector breakdown, analysts said loans to property developers account for a lion’s share. The National Financial Regulatory Administration and ICBC didn’t immediately comment. Fitch said the Chinese banks it covers had about 6% to 7% of their outstanding credit in property development loans, with the NPL ratio in that segment relatively stable at 4% to 5% in the past few years. A faster reduction in these loans means lenders will be able to free up resources to engage in other businesses, said the people.

“In the long run the move should result in cleaner and healthier balance sheets for banks, release some provision resources and allow them to focus better on expanding new businesses,” said Elaine Xu, director for Asia Pacific financial institutions at Fitch.
But for lenders with relatively low provision coverage for bad loans, a rapid increase in write-offs could potentially hit their profits and capitalization in the short term, Xu added. “Overall it’s net positive.”
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GulfLander

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"The China National Offshore Oil Corporation (CNOOC) announced on Monday that it has discovered a major oilfield in the eastern South China Sea, with proven reserves exceeding 100 million tonnes. The newly discovered Huizhou 19-6 oilfield marks a breakthrough in China's offshore oil exploration, as it is the country's first large-scale integrated clastic oilfield found in deep to ultra-deep layers, according to the CNOOC."

 
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