Poll Reveals Concern Among Global Investors Over China’s Economy Amid Real Estate Crisis

A woman rides a scooter past the construction site of an Evergrande housing complex in Zhumadian, central China's Henan Province on Sept. 14, 2021. (Jade Gao/AFP via Getty Images)

According to a September poll by the Bank of America, China’s ongoing real estate crisis is threatening the country’s economy, leaving many global fund managers wary.

The poll surveyed 222 global fund managers with $616 billion in assets under management and found investors are bracing for a further decline in China’s stock market.

Bank of America said the “avoid China” sentiment has become one of the main opinions among those who were surveyed.

One-third of surveyed fund managers cited Chinese real estate as the most likely source for a “systemic credit event,” doubling the percentage from the previous month.

Over one-fifth of responders said shorting China’s equities would be the most crowded position in the financial markets.

Meanwhile, no one surveyed expects China’s economy to improve in the next 12 months.

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The survey reflected concerns that the real estate crisis is continuing to fuel pessimism not only about China’s economic stability but that of the world, reported Nikkei.

Real Estate Crisis

Li Hengqing, senior auditor and director of the Washington-based Institute for Information and Strategic Studies, spoke to The Epoch Times about China’s worsening real estate crisis.

Investors would not get their money back once a property enterprise defaults, both interest and principal, he said.

“The [Invester’s] money will never be recovered,” Mr. Li said on Sept. 15. “Once this situation occurs, the repercussions will be very far-reaching.”

Evergrande Bankruptcy 

On Aug. 17, China’s first-ever property giant Evergrande Group filed for bankruptcy protection in New York and requested the court to recognize its offshore debt restructuring plan of arrangement. The move thwarts creditors from filing lawsuits against Evergrande in the United States or freezing its assets.

Evergrande’s debt, according to the company’s unaudited interim results report on Aug. 27, could reach 2.388 trillion yuan (about $320 billion). That figure represents about 2 percent of China’s GDP and exceeds the worth of Elon Musk, the world’s richest man.

A housing complex by Chinese property developer Evergrande in Huaian in China's eastern Jiangsu Province on Sept. 17, 2021. (STR/AFP via Getty Images)

As of Sept. 1, 34 of China’s top 50 private real estate developers had defaulted on their overseas debt. A report by Bloomberg said that the remaining 16 companies that have not yet defaulted must pay $1.48 billion in coupons or principal on their bonds in September.

Likewise, state-owned real estate enterprise, Hong Kong-listed Sino-Ocean Group, has suspended the repayment of all overseas debts, announcing on Sept. 15 that eight of its overseas U.S. dollar-denominated securities have been suspended from 9:00 a.m. and carry out an overall revamp. Those eight bonds combined approximately $3.92 billion in total.

Sino-Ocean Group’s statement admitted that China’s real estate industry and developers have faced unprecedented challenges over liquidity and funding since the second half of 2021.

The Chinese real estate industry is collapsing, and a systemic financial crisis has indeed erupted, according to Mr. Li.

One of the deadly blows to China’s real estate sector is that home prices are falling by “at least 5 percent to 10 percent of the original price and, in some places, up to 30 percent,” he said.

The envisaged profits are all gone, along with lots of debts and repayments owed to the project, materials, and wages of construction workers, weighing down on the whole real estate industry.

The decline in China’s real estate industry, as per Mr. Li, is also due to a drastic reduction in China’s population and weak consumption due to three years of strict anti-COVID-19 policies.

The Evergrande logo is seen on residential buildings in Nanjing, in China's eastern Jiangsu Province, on Aug. 18, 2023. (Stringer/AFP via Getty Images)

Professor Xu Chenggang, a senior researcher at the Center for the Study of the Chinese Economy and Institutions at Stanford University, said the collapse of China’s real estate sector is “incurable” no matter what remedies the Chinese communist authorities may take.

Mr. Xu said that if the Chinese authorities try to step in and save the real estate market, it won’t work.

“If the Chinese government injects capital into these enterprises or exempts debts, or to a considerable extent freeze the market to keep property prices from falling, it will only result in a market with prices but no transactions,” Mr. Xu told the Chinese language of NTD TV on Sept. 12.

“Because no one can afford a house at those prices, then, without selling property, developers cannot repay the debts … So, it [the CCP] has no way to save the market,” Mr. Xu said.

Weakening real estate-related industries—once accounting for about 25 percent to 30 percent of China’s GDP—have a severe impact on China’s economy, said Mr. Xu.

Based on last year’s data, he estimated this year would see zero or negative growth in the Chinese economy.

Xin Ning contributed to this article.