China’s Largest Real Estate Developers Face Financing Crunch

By Nicole Hao
Nicole Hao
Nicole Hao
Nicole Hao is a Washington-based reporter focused on China-related topics. Before joining the Epoch Media Group in July 2009, she worked as a global product manager for a railway business in Paris, France.
September 28, 2020Updated: October 30, 2020

A new study on China’s real estate market reported by state media paints a bleak picture: 76 of the biggest real estate developers need to repay 2.5 trillion yuan (about $373.6 billion) over the next 12 months, including 177 billion yuan (about $2.64 billion) in interest.

Such enormous debt has prompted real estate firms to refinance.

A second study, conducted by private financial data service supplier Chinese Beike Institute, revealed that Chinese property developers issued 307 bonds in the third quarter of 2020 and collected about 324.7 billion yuan ($47.67 billion) from Chinese and overseas financial markets.

“The scale of financing in Q3 is 14 percent higher than Q3 in 2019, and is the highest one in history,” the study concludes.

Property developers also gave big discounts to new buyers, and sought to restructure to pare their debts.

In August, Evergrande, China’s largest real estate firm by sales volume, asked the Guangdong provincial government to help restructure its assets to avert a cash crunch.

China Evergrande Centre in Hong Kong
An exterior view of China Evergrande Centre in Hong Kong, on March 26, 2018. (Bobby Yip/Reuters)

Trillions in Debt

Chinese state-run 21st Century Business Herald published on Sept. 27 the results of a study conducted by state-run Nandu Big Data Research Institute.

The Nandu study found that Evergrande needed to pay 395.7 billion yuan ($58.1 billion) in debt with interest in the next 12 months. China’s second-largest property developer by sales volume, Country Garden, has to pay 105.8 billion yuan ($15.53 billion), third-largest Vanke has to pay 96.8 billion yuan ($14.21 billion), and fourth-largest Sunac has to pay 140.6 billion yuan ($20.64 billion).

The four companies with the largest debts—Evergrande, Sunac, Greenland, and Country Garden, respectively—would have to repay more than 100 billion yuan ($14.68 billion) in debt (with interest) within a year.

In total, 76 of the top firms owe more than 2.5 trillion yuan in “interest-bearing liabilities,” or about 35 percent of total such liabilities owed by the companies.

Epoch Times Photo
A man works at a construction site of a residential skyscraper in Shanghai, China on November 29, 2016. (JOHANNES EISELE/AFP via Getty Images)


Evergrande Group was founded by Xu Jiayin, a businessman from central Henan Province. He established the company in Guangdong Province in 1996.

In 2019, Evergrande slashed the price of condos to promote sales but angered buyers who had paid full price for the properties. Evergrande reportedly hired thugs to beat up people who asked for refunds.

This year, Evergrande’s situation is worse due to China’s declining economy, exacerbated by the CCP virus pandemic and widespread flooding.

A letter that Evergrande apparently wrote to the Guangdong provincial government on Aug. 24 was leaked by Chinese media recently. While Evergrande denied it on Sept. 24, Reuters cited three insiders who confirmed its authenticity.

Evergrande reportedly said in the letter: “By June 30, 2020, the interest-bearing liabilities Evergrande owed was 835.5 billion yuan ($122.65 billion).”

Among those debts, 130 billion yuan ($19.08 billion) would mature on Jan. 31, 2021. At that time, Evergrande will need to pay back the debts, plus 13.7 billion yuan ($2.01 billion) in interest.

“After paying the 130 billion yuan, the debt ratio (asset-liability ratio) will be higher than 90 percent. Evergrande will face a cash crunch,” the letter states.

In an attempt to attract more business, on Sept. 7, Evergrande announced a 30 percent discount on all their real estate products until Oct. 8.

Epoch Times Photo
People are standing in front of a closed real estate agency in Anxin county in China’s Hebei province on April 3, 2017. (STR/AFP via Getty Images)


Other Chinese property developers are facing similar challenges.

21st Century Business Herald, citing insider sources, reported on Sept. 26 that Greenland Holdings—China’s 15th largest property developer by sales volume—was reconstructing its organization and packaging a new subsidiary to seek an initial public offering (IPO) in Hong Kong.

The Herald estimated that Greenland could generate about 6 billion yuan ($880 million) should it go public.

According to the Nandu study, Greenland needs to pay 140.6 billion yuan ($20.64 billion) in interest-bearing liabilities in the next 12 months.

The Herald also reported on Sept. 24 that the Henan provincial real estate chamber of commerce organized property developers to discuss keeping current real estate price levels—as slashing the prices wouldn’t be able to save them.

The difficulties lie in the central government’s “three red lines” policy, according to the report.

On Aug. 20, People’s Bank of China and the Housing and Urban-Rural Development Ministry co-chaired a seminar in Beijing, in which they announced limits on borrowing by developers: a 70 percent ceiling on debt-to-asset ratio (excluding presales); a 100 percent limit on net debt-to-equity ratio; and cash holdings can’t be lower than short-term debt.

A previous version of this article included incorrect figures due to a mistranslation from the Chinese. The Epoch Times regrets the error.