Fitch Ratings yesterday cut its growth forecast for China’s economy this year, citing a slowdown in the country’s colossal property sector, which is facing headwinds over faltering real-estate giant Evergrande Group (恆大集團).
China enjoyed a swift economic rebound from the COVID-19 pandemic, but strict new rules on the country’s developers have caused a deleveraging rush and helped push housing giant Evergrande to a crisis point.
Financial markets have tumbled over fears that the Chinese group could collapse, leading to possible contagion in the world’s second-largest economy and beyond.
Photo: AP
Evergrande shares soared as much as 32 percent yesterday in the biggest daily percentage rise since listing in November 2009, after its unit said on Wednesday it had “resolved” a coupon payment on an onshore bond.
Fitch said it expected China’s economic growth to come in at 8.1 percent this year, compared with a previous 8.4 percent estimate, saying the “main factor weighing on the outlook is the slowdown in the property sector.”
Weakness in the property market comes after a bout of regulatory tightening by authorities looking to rein in surging prices and companies’ excessive borrowing.
Beijing has cracked down on developers in a bid to force them to offload debt, introducing its “three red lines” to curb leverage last year.
“Housing starts are falling and financial pressures are weighing on real-estate investment,” Fitch said in its latest report.
“Residential investment directly accounts for around 10 percent of GDP, and property activity has large spillovers to other industries,” it added.
Chinese Premier Li Keqiang (李克強) on Wednesday called for efforts to keep the economy running steadily, state media reported.
A State Council meeting he chaired underlined measures to promote consumption, stabilize commodity prices, and maintain growth of foreign investment and trade.
Separately, Chinese Estates Holdings Ltd (華人置業集團), the second-largest shareholder of Evergrande, said yesterday it had sold US$32 million of its Evergrande stake and plans to exit the holding completely.
“The directors are cautious and concerned about the recent development of China Evergrande Group, including certain disclosure ... on its liquidity,” Chinese Estates said in a filing to the Hong Kong Stock Exchange.
Chinese Estates, which owned about 6.5 percent of Evergrande’s equity as of Sept. 10, data showed, said it has mandated a sale of all or part of the remaining 5.66 percent Evergrande stake either on the market or through block trades.
The disposal mandate is valid for 12 months from yesterday’s shareholders’ meeting to approve the sale, it said.
Chinese Estates said it had already sold 108.91 million shares, or 0.82 percent, of Evergrande’s issued share capital between Aug. 30 and Tuesday for HK$246.5 million (US$31.67 million).
The company estimated that if the entire stake is sold, it would realize a loss of about HK$9.49 billion for the year ending in December.
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