Chinese construction companies returned, in January, to issuing debt securities abroad, through the Macau bond market, after five months of interruption caused by the entry into default of several giants in the sector.
Shanghai Jinmao Investment Management Group and Yuexiu Group, both state-owned, each issued around two billion yuan (273 million euros) in the offshore market, through Macau, according to a report published today by China Index Academy Ltd., a real estate consultancy.
The bonds have a coupon of 4%.
Debt on the external market denominated in Chinese currency is mainly traded among Chinese investors and has less liquidity than debt issued in US dollars, according to the consultant.
The issuance of these bonds comes after Beijing moved forward with several measures to improve the financing conditions of construction companies, aiming to stimulate a key sector for the recovery of the Chinese economy, and which was strongly hit, in the last two years, by a campaign that aimed to reduce the leverage levels, resulting in a liquidity crisis, and by the ‘zero cases’ policy of covid-19, which weighed on the country’s economic activity.
Beijing’s measures include lifting a long-standing ban on stock trading and ordering banks to increase lending to the sector.
In 2022, Chinese construction companies failed to pay a total of 149.6 billion yuan in onshore bonds and US$30 billion in offshore bonds, according to a report by Chinese brokerage GF Securities. A total of 26 Chinese homebuilders defaulted on the Chinese debt market.
With liabilities in excess of US$300 billion, the Evergrand group has become emblematic of the liquidity crisis affecting China’s real estate sector.
The China Index Academy considered it “unlikely” that appetite among investors for bonds issued by Chinese construction companies “will be restored in the short term”.
“Overseas bond issuance is finally seeing a new dawn, after five months of suspension,” noted the report. The main state-owned construction companies are “paving the way” for a recovery in debt issuance abroad, he added.
In total, 958 billion yuan (130 billion euros) in bonds issued by Chinese construction companies will expire by the end of this year, of which more than a third were issued in the offshore market, according to data from the China Index Academy.
*With Lusa
