Chinese Housing Companies’ Overseas Financing Volume Increased by More Than 50% in 2019

  • Since the fourth quarter of 2019, many companies have experienced a tight funding chain.
  • Large-scale real estate companies used methods such as selling projects, reducing investment, and accelerating cash withdrawal
  • According to statistics from Real Estate Research Center, the total financing of 95 typical housing companies monitored in 2019 was $215.2 billion, per year increase of 5.5%.

Since January 2020, real estate companies have continued to issue intensive financing plans. On January 8, Longhu Group announced the issuance of a total of $650 million with a maximum interest rate of 3.85%. As of the 7th, eight companies including Country Garden, Longhu, and Hejing Taifu have successively released more than the $2 billion in financing plans.

Country Garden is a property development company based in Guangdong Province, China, owned by Yang Guoqiang’s family. In 2018, it is ranked 353rd in Fortune Global 500 List.

Due to the continued tightening of the financing environment, since the fourth quarter of 2019, many companies have experienced a tight funding chain. Large-scale real estate companies used methods such as selling projects, reducing investment, and accelerating cash withdrawal to achieve cash return. On the other hand, the tightening of domestic financing has caused most housing companies to switch to issuing bonds overseas.

On January 8, statistics from the Central Plains Real Estate Research Center showed that for the whole of 2019, the total overseas financing of monitored real estate companies reached $75.2 billion per year, one-year increase of 52%, and the total debt issuance reached a new high. Issuance of US dollar bonds is an important supplementary channel for some real estate enterprises, which is of great benefit to alleviating the financing of some enterprises. Zhang Dawei, a chief analyst of Zhongyuan Real Estate, believes that, overall, the real estate industry’s funds are still tight. Financing will continue to run high in the short term.

According to statistics from Real Estate Research Center, the total financing of 95 typical housing companies monitored in 2019 was $215.2 billion, per year increase of 5.5%. At the same time, the annual financing cost continued to rise and exceeded 7%, an increase of 0.54 percentage points from 6.53% in 2018.

Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits. The abbreviation “SME” is used by international organizations such as the World Bank, the European Union, the United Nations and the World Trade Organization (WTO).

It is worth mentioning that the impact of the tightening financing environment on housing enterprises of different sizes has also been differentiated, and the impact on some small and medium-sized housing enterprises is more obvious. Due to short-term debt repayment pressure and limited financing channels of some small and medium-sized enterprises, coupled with the weak recovery of business operations, many small and medium-sized enterprises experienced debt problems at the peak of debt repayment. For example, in 2019, real estate companies with relatively large debt defaults include Yinyi shares, Sansheng Hongye, Yihe Real Estate, and Guogou Investment.

Recently, many real estate companies have paid more attention to the safety of the capital chain. The main reason for maintaining stability in the real estate market is to prevent financial risks. Therefore, in recent months, policies on various aspects of real estate financing have been standardized and tightened. At present, for trust financing and overseas financing, the regulatory signals are “regular,” rather than “full suspension.” For large real estate companies, the impact is relatively limited. But for SMEs and high-debt housing companies, the difficulty of financing will continue.

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Doris Mkwaya

I am a journalist, with more than 12 years of experience as a reporter, author, editor, and journalism lecturer." I've worked as a reporter, editor and journalism lecturer, and am very enthusiastic about bringing what I've learned to this site.  

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