China’s Property Sector Could Trigger Slower Growth

Most people won’t have heard of the Chinese property developer Kaisa Group.

But as China’s economy logs it slowest growth in more than two decades, the company’s troubles underline the country’s wider problems.

Kaisa Group, based in the sprawling industrial city of Shenzhen, missed a debt payment of $23m (£15m) earlier this month, unnerving the local stock and bond markets.

And investors across the globe, not just in China, are paying close attention to the company’s fate.

Despite what appeared to be a healthy balance sheet, the firm ran into problems after the local government blocked sales of its property units without any explanation.

The company’s chairman Kwok Ying Shing and other key executives have since stepped down, and several creditors are now asking a court to freeze its assets.

Its Hong Kong-listed shares were suspended in December after losing about half of their market value and ratings agencies have downgraded the firm’s credit outlook citing a likely default on its debt obligations.

There are concerns it may become the first major Chinese real estate firm to go bust, an outcome which would signal growing financial stress not just in the property sector but the wider economy.

China’s real estate sector accounts to about a third of the country’s gross domestic product (GDP), meaning that any downturn in the housing market will lead to a drop in growth.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza