Beijing – China’s leading companies in the real estate sector, Evergrande and Kaisa, have failed to repay their foreign loans. As a result, Fitch Ratings, an international credit rating agency, has declared both companies as defaulters. Evergrande has not been able to repay more than $1 billion in debt. It has been revealed that Kaisa has not repaid the loan of $400 million. Last month, the US Federal Reserve warned that the crisis in China’s real estate sector may increase the tensions in the Chinese economy and hit the global economy, including the United States.
Over the past year, the shares of Evergrande, China’s leading company in the real estate and construction sector, had fallen over 80%. The company had a staggering $305 billion in debt, had been claimed to be unable to repay it. The company had extended the repayment term of some of the loans and succeeded in repaying a part. However, just a few days ago, the company had mentioned in a statement that it was unable to repay the next loans and instalments. This had increased the possibility of the company being included in the defaulter list.
On Thursday, Fitch Ratings, an international credit rating agency, announced that Evergrande had defaulted. Evergrande has not repaid about $1.2 billion in debt, according to Fitch. Two subsidiaries, including Evergrande, have been declared as ‘restricted defaulters’. In addition, Kaisa Holding Group, a Chinese company in the real estate sector, has been accused of being a bad debtor. The company has not repaid the $400 million debt.
Six months after Fitch’s announcement, the number of defaulting real estate companies in China rose to 10. Real estate and related sectors account for nearly 30% of China’s economy. It has surfaced that among the loans extended by the banks of China, the highest bad debts were from this sector. In 2021, the bad debts and interest statistics of Chinese companies sank to about $10 billion, of that 36% belongs to companies in the real estate sector.
A statement from China’s Central Bank said that the interests of creditors and shareholders would be protected. Simultaneously, the future of Evergrande will be as per the rules of the market, was also clarified. Local analysts claim that defaulters like Evergrand and Kaisa will not appear to have a significant impact in China and Hong Kong. The foremost reason behind it is said to be the Central Bank’s financial aid worth $190 billion, announced a few days ago. However, it is predicted that the repercussions of the investors at the international level, especially in the US and Europe, would be sharp.
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