Even the Once Stable Simao... China's Real Estate Market Faces Another Default Crisis

[Image source=AP Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] The Chinese real estate industry is once again facing a default (debt default) crisis this week.

Bloomberg reported on the 12th, "As the debt maturities of Chinese real estate developers come due this week, the bond market may once again experience turbulence."

Smau Group, ranked 14th in the industry by sales volume, has several bond interest maturities coming due this week.

Smau Group must repay a total of $376 million (approximately 450 billion KRW) this week. The interest on dollar bonds due by the 13th is $6.9 million. Then, on the 15th, $28 million, and on the 16th, $13 million in dollar bond interest maturities are also due.

Bloomberg, citing sources, reported, "Smau Shanghai, a subsidiary of Smau Group, has separately prepared funds to repay 1.9 billion yuan (approximately 350 billion KRW) in yuan-denominated bonds by the 15th."

Smau Group, which was considered one of the relatively sound companies in China, was rated investment grade just two months ago. However, last week it fell into a practical default state after failing to repay domestic loans.

Trust company Zhongcheng Trust stated, "Smau was supposed to repay 910 million yuan (approximately 170 billion KRW) in loans by December 25 last year according to the agreement, but failed to repay 320 million yuan," and demanded early repayment of other remaining loans.

Although Chinese authorities have instructed banks to increase real estate loans in the first quarter and eased debt limits for real estate developers, defaults among companies are expected to increase.

In particular, as the cost of raising funds in overseas financial markets rises, many companies are finding it difficult to extend the maturities of overseas bonds.

Evergrande Group is trying to avoid its first domestic default. Evergrande extended the creditor voting period until the 13th to defer repayment of 4.5 billion yuan (approximately 840 billion KRW) in yuan-denominated bonds that matured on the 8th by six months.

Evergrande fell into default for the first time last month after failing to repay interest on dollar bonds issued overseas.

Bloomberg reported, "Chinese real estate developers must repay at least $197 billion (approximately 234 trillion KRW) this month, including bond principal and interest, trust products, and unpaid wages to millions of migrant workers."

This content was produced with the assistance of AI translation services.