China’s Property Sector Facing Liquidity Crisis: Major Developers Defaulting on Debt Payments

China’s property sector continues to face challenges as major developers struggle with a liquidity crisis resulting from a regulatory crackdown on high leverage. The industry giant China Evergrande Group was wound up in January, while competitor Country Garden Holdings is facing a liquidation petition in Hong Kong. Other big players like China Vanke are also finding it difficult to sell flats and raise funds, impacting the growth of the world’s second-largest economy.

To address the funding crunch in the sector, the Chinese government has introduced a mechanism to coordinate with financial institutions in supporting real estate projects. This plan, unveiled in January by the Ministry of Housing and Urban-Rural Development and the National Financial Regulatory Administration, is now operational in more than 310 cities across the country.

Over 6,000 real estate projects deemed eligible for financing support have been identified, with nearly 83% coming from private or mixed-ownership enterprises. As of the end of February, more than 200 billion yuan (US$27.8 billion) in bank loans had been approved to assist these projects.

State news agency Xinhua reported that various local governments and financial institutions are actively implementing these coordination mechanisms. Premier Li Qiang also announced plans to accelerate the development of a new model for the property sector, emphasizing the construction of more affordable housing and meeting diverse housing demands.

However, Minister Ni emphasized that this new model would prioritize the principle that “housing is for living in, not for speculation.” The focus will be on planning and constructing affordable housing, improving public infrastructure, and redeveloping urban villages.

The Chinese government remains committed to addressing the challenges in the property sector and ensuring the stability of the market amid the ongoing liquidity crisis.