Chinese policymakers faced with 'moral dilemma' to avoid property crisis contagion

Residential sales to fall 10% next year

clock • 4 min read
Chinese real estate developers are heading for a “tough” 2022
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Chinese real estate developers are heading for a “tough” 2022

Authorities in China are faced with a “moral hazard dilemma” as they manoeuvre to contain the economic fallout from the country’s evolving real estate crisis. Still, a Lehman Brothers-like scenario sparked by Evergrande is seen as “unlikely”.

Nevertheless, Chinese real estate developers are heading for a "tough" 2022, according to recent analysis by S&P Global Ratings. In a worst-case scenario, one third of China's developers may see their liquidity "acutely strained", while defaults are set to rise as $84bn of debt matures over the next five quarters, according to the report. Meanwhile, China's residential sales are forecast to decline by 10% next year, and a further 5%-10% in 2023. Klisman Murati, CEO of research firm Pareto Economics, said: "A slowdown in the Chinese housing market in both supply and demand could lead t...

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