Fitch Ratings Inc has called real estate the “biggest threat” to Chinese banks as surging loans tied to properties coincide with defaults and falling sales.
Corporate loans backed by buildings have grown almost fivefold since 2008 and residential mortgages have more than tripled in the period among lenders rated by Fitch, the company said yesterday. That has seen property loans held by China’s four biggest lenders soar to a total 2.26 trillion yuan (US$363.8 billion), according to their annual reports.
“Collateral is supposed to reduce bank risk — but the rise of property collateral in corporate loans may actually increase the chance of bank failure,” Fitch analysts Jack Yuan and Grace Wu said in the report. “This is because the widespread use of such collateral has lowered the perceived risks of lending, fueling China’s credit build-up and spreading real-estate risk to other sectors of the economy.”
Alarm bells sounded last month when Kaisa Group Holdings Ltd (佳兆業集團) became the first Chinese developer to default on offshore bonds, putting more scrutiny on a sector that made up a third of the nation’s economy in 2013, according to Gavekal Dragonomics. Property prices in 70 Chinese cities have fallen for more than a year, the worst losing streak in at least a decade, while sales have dropped for 11 of the past 24 months, Bloomberg-compiled data show.
Loans backed by properties now comprise 40 percent of all facilities held by Fitch-rated banks, according to the report. Total credit to real estate could be as high as 60 percent if other types of financing besides direct loans are included, Fitch said.
“The property market is usually one of the main revenue contributors to the state,” Schroder Investment Management Ltd head of credit research for Asia Raymond Chia said. “With the weakness in the sector, especially with excess inventory overhang as well as weak earnings by developers, economic growth will be affected.”
Industrial and Commercial Bank of China Ltd (中國工商銀行), the world’s biggest bank by assets, held 443.5 billion yuan of real-estate loans, or 6.6 percent of all facilities, at the end of last year, according to its annual report. The portion for Bank of China Ltd (中國銀行), the nation’s second-largest, was 714.6 billion yuan of advances, or 8.4 percent of its credit book.
China Construction Bank Corp’s (中國建設銀行) property loans were reported at 520.1 billion yuan, or 5.5 percent of overall facilities. Agricultural Bank of China Ltd’s (中國農業銀行) real-estate loans stood at 581.1 billion yuan, or 11.3 percent.
There are still reasons for optimism on Chinese property, helped by the People’s Bank of China (PBOC) cutting the lenders’ reserve requirement ratio twice this year, Australia and New Zealand Banking Group Ltd Singapore-based credit strategist Owen Gallimore said.
“The recent data on property sales has shown improvement, especially for the biggest developers,” he said in an interview. “And with the PBOC aggressively easing, it’s hard to be bearish on Chinese property.”
Banks and developers will be hoping the bulls are correct. Chinese loans secured by real estate have increased 400 percent since 2008 at lenders rated by Fitch, compared with a 260 percent rise in facilities overall, according to Fitch.
This time was supposed to be different. The memorychip sector, famous for its boom-and-bust cycles, had changed its ways. A combination of more disciplined management and new markets for its products — including 5G technology and cloud services — would ensure that companies delivered more predictable earnings. Yet, less than a year after memory companies made such pronouncements, the US$160 billion industry is suffering one of its worst routs ever. There is a glut of the chips sitting in warehouses, customers are cutting orders and product prices have plunged. “The chip industry thought that suppliers were going to have better control,” said
Enimmune Corp (安特羅生技) has obtained marketing approval from the Food and Drug Administration (FDA) for its EnVAX-A71 vaccine for enterovirus 71 (EV-71), becoming the nation’s first enterovirus vaccine completely made in Taiwan, it said yesterday. After spending 13 years and NT$1.5 billion (US$49.77 million) on the research and development of the vaccine, Enimmune plans to start manufacturing and marketing it by the end of March, the company said in a statement, without disclosing customer order figures. “It is possible that the vaccine would not be included in a national vaccination program initially, and consumers would need to pay for it themselves,” parent
Vaccine skeptics blocking transfusions for life-saving surgeries, Facebook groups inciting violence against doctors and a global search for unvaccinated donors — COVID-19 misinformation has bred a so-called “pure blood” movement. The movement spins anti-vaccine narratives focused on unfounded claims that receiving blood from people inoculated against COVID-19 “contaminates” the body. Some have advocated for blood banks that draw from “pure” unvaccinated people, while medics in North America say they have fielded requests from people demanding transfusions from donors who have not received a vaccine. In closed social media groups, vaccine skeptics — who brand themselves as “pure bloods” — promote violence against doctors
Asteroid mining start-up AstroForge Inc is planning to launch its first two missions to space this year as it seeks to extract and refine metals from deep space. The first launch, scheduled for April, is to test AstroForge’s technique for refining platinum from a sample of asteroid-like material. The second, planned for October, would scout for an asteroid near Earth to mine. The missions are part of AstroForge’s goal of refining platinum-group metals from asteroids, with the aim of bringing down the cost of mining these metals. It also hopes to reduce the massive amount of carbon emissions that stem from mining