Chinese developers begin New Year with deepening debt woes

Just this week, defaulted Chinese builder Sunac China Holdings Ltd. received another winding-up petition. While the company successfully restructured its offshore debt in 2023, concerns about its ability to meet payment obligations have pushed its stock and bond prices to the lowest level in months.

Three other major developers including Country Garden Holdings Co. and Times China Holdings Ltd. are also set to defend against such petitions this month.

Meanwhile, China Vanke Co., one of the country’s largest property developers, has $4.9 billion of debt coming due this year as worries grow about its liquidity and whether it will be able to find new financing to avoid defaults.

The financial deterioration of many developers comes despite Beijing’s efforts to stabilize the housing market. The government has cut borrowing costs on existing mortgages, relaxed buying curbs in big cities and lowered taxes on home purchases. It also trimmed purchasing costs for people seeking to upgrade dwellings in some big cities.

Even so, the overall housing sector has shown minimal signs of recovery, with sales from the top 100 builders slumping 28.1% last year compared with a 16.5% drop in 2023.

Many developers are still working on restructuring. Country Garden just proposed new terms with key banks that would slash its debt and lower borrowing costs, and defaulted developer Logan Group Co. recently unveiled a revised term sheet for its $8 billion offshore restructuring.

But without a significant recovering in the sector, developers will continue to struggle meeting repayment obligations. Chinese builders who were previously affected by the property crisis will be the biggest source of defaults in Asia in 2025, according to analysts at JPMorgan Chase.

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