China’s Debt Crisis Will Worsen, Nikkei Asia Warns

Turmoil in China's housing market, coupled with weak consumer sentiment, is weighing on the nation's economy.

Moody's Investors Service this week downgraded China's credit rating and signaled it may do the same for dozens of local government financing vehicles (LGFFs) funding infrastructure projects, as well as for state-owned banks. I Photo: Max12Max Wikimedia Commons

The biggest property developer, Evergrande, is now facing a lawsuit and may end up being liquidated, while Dalian Wanda Group, China's largest mall operator, is selling assets to avoid a default. Debt-laden local governments are also struggling, as reported by Nikkei Asia.

This week, Moody's Investors Service downgraded China's credit rating and signaled it may do the same for dozens of local government financing vehicles (LGFFs) funding infrastructure projects, as well as for state-owned banks.

Presale properties are taking a hit in China as buyers fear that distressed developers will not be able to deliver.

The share of presale properties between January and October this year slumped to the lowest point since 2017.

Chinese President Xi Jinping's inner circle "is desperate to change the China-cratering narrative dominating global media coverage," writes William Pesek. But while Team Xi tries to reassure investors and repair the real estate sector, "muddying the reform process with endless bailouts, marshaling new waves of bank credit and top-down government spin will only allow China's default nightmare to fester," he argues.

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