China has tightened its tone against struggling property developers in the ongoing real estate crisis. Companies that are no longer solvent and have lost their ability to do business should go bankrupt and reorganize, said China’s Housing and Rural Development Minister Ni Hong.
“Conduct that harms the interests of the public will be investigated in accordance with the law so that they pay the price they deserve,” he said in the press conference with ministers from other departments on living standards, which took place on the sidelines of the convening People’s Congress.
China Evergrande $300 billion in debt
China’s real estate crisis continues to weigh on the economy. Some creditors have taken legal action against property developers such as China Evergrande. The developer, the world’s most indebted, with the equivalent of more than $300 billion, is to be liquidated. The authorities initiated an investigation against the head of the southern Chinese company last fall – although no specific accusation is known. Another very large group, Country Garden, is also facing a winding-up application in a Hong Kong court, where the group is listed on the stock exchange.
The real estate sector contributes about a fifth of China’s economic output. But since prices and demand on the market have fallen, companies are lacking money to service their creditors or to complete projects that have already been promised – to the displeasure of many buyers.
China is adjusting policies
Minister Ni emphasized that the government has already adjusted its policies, for example by cutting interest rates or for people who want to exchange their old apartment for a better one. Beijing wants to stabilize the market and help struggling companies. “The housing market is going through a transformation,” Ni said. He pointed out that the supply and demand situation in the real estate market varies from city to city. Beijing therefore wants to coordinate the financing of housing projects with local governments.