Wanda Subsidiaries Also Struggling to Repay Debt
Government Still Passive in Taking Measures
As the downturn in China's real estate market prolongs, related companies continue to post losses. Some are facing survival crises due to their inability to repay debts on time.
According to the Chinese economic media outlet Caijing on the 18th, out of 113 real estate companies listed on the Shanghai and Shenzhen A-shares, 67 have announced their first-half results, with 42 reporting net losses. The number of profitable companies, which was around 67 during the same period last year, has shrunk to 25 this year.
The total losses of the 42 companies amount to 25.7 billion yuan (approximately 4.5234 trillion KRW), with 8 companies each posting losses exceeding 1 billion yuan. Fifteen companies, including the state-owned real estate developer OCT, recorded losses for the first time in the first half of this year. OCT stated that "profits decreased due to changes in the real estate market environment and the rollover structure of company projects." Other companies cited reasons such as reduced investment income due to losses in affiliates, decreased other income, and increased financial costs.
As of this day, nine companies have been designated as risk warning stocks by authorities. Among them, five companies are classified as delisting warning stocks, and four as other risk warning stocks. These companies include Shuyuan, Oceanwide, Jiakai, Xinlian, Songdou, Tongda, Simao, Sunshine City, and Taihe. Except for Shuyuan, all these companies are in a loss-making state. In particular, Oceanwide's losses surged from 2.086 billion yuan last year to an estimated 4.2 to 5.5 billion yuan.
Some companies are in crisis situations where they cannot repay debts on time. According to Bloomberg, Dalian Wanda Group's core affiliate, Dalian Wanda Commercial Management Group, informed creditors that it is short of at least 200 million dollars out of the 400 million dollars (approximately 505.8 billion KRW) bond maturing on the 23rd. Wanda Group has been one of the few developers to survive in the offshore high-yield bond market amid the slowdown in China's real estate sector.
Earlier, Evergrande Group announced that its total losses over 2021-2022 amounted to 581.9 billion yuan, with total debt reaching 2.44 trillion yuan as of last year. Yuan Yang Group, a government-supported developer, has avoided debt repayment issues thanks to creditors related to the government, but it suspended trading of its 4% interest yuan-denominated bonds due to repayment uncertainties on this day, and its stock price in the Hong Kong market fell more than 11% intraday.
Warning signals are sounding in the market. Charles McGregor of Lucrol Analytics expressed concern, saying, "If Wanda fails to repay the bonds maturing in July, it will be another cause of collapse in China's high-yield real estate bond market," and that investors will be reluctant to hold these bonds.
Despite this situation, the Chinese government has shown a somewhat passive stance toward stimulating the real estate sector. Despite the base effect, China's GDP growth rate for the second quarter was only 6.3%, and the youth unemployment rate (ages 16-24) in June reached a record high of 21.3%, increasing the possibility of an economic recession. However, the Chinese government has only introduced support measures for durable goods purchases such as automobiles and home appliances to boost consumption, without separately preparing measures to improve the real estate market.
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