Chinese real estate group China Evergrande is becoming threatening

The situation for the debt-laden Chinese real estate group China Evergrande is becoming more and more threatening. The rating agency Fitch has now downgraded its credit rating for the group and two of its subsidiaries due to the risk of impending payment defaults. The step "reflects our view that a failure in some form seems likely," it said to justify. "We believe credit risk is high with tight liquidity, declining contract sales, pressures of late payments to suppliers and contractors, and limited progress in selling assets." The background: The Chinese authorities have been putting more and more industries on the curb for months - including the real estate sector. The regulator enacted hundreds of new rules and restricted borrowing and land purchases to cool the booming housing market. But not only prices came under pressure, but also real estate companies. Loan defaults and bankruptcies followed. Experts are now warning of the effects on the financial sector and the country's economy as a whole. While the rate of bad loans at the Chinese commercial banks was overall stable at a low level of 1.76 percent in the past quarter, according to the supervision, the picture is different for individual institutions and with a view to the housing market: The Ping An Bank in Shenzen, for example, burst three times as many loans in the real estate sector in the first half of 2021 as a year ago. The Bank of Jinzhou saw an increase of more than 50 percent and the Bank of Shanghai more than 25 percent. According to insolvency courts, 220 real estate companies have filed for bankruptcy this year, and so there were continuous bankruptcies in the industry in the previous year. The real estate market accounts for around a quarter of the Chinese economy. A lush flow of credit fueled the boom in the industry for years. The real estate developer Evergrande has long been a symbol of this high altitude. Now the industry giant from Guangdong stands for the downward spiral into which many developers have slipped. Under the pressure of falling profits, the company is struggling to refinance loans. S&P Global estimates the debt Evergrande will have to repay next year at $ 37 billion.