Chinese developers’ overseas spending spree dries up as Beijing tightens screws to restore order at home

Name: Evergrande debt crisis: How likely is it that bondholders can recoup their investments?
Uploaded: 2021-10-24T02:00:25.000Z
Duration: 8 min 8 s
Description: Evergrande debt crisis: How likely is it that bondholders can recoup their investments?

Chinese developers’ overseas investments fell to US$1.9 billion this year versus a record high of US$17.5 billion in 2017, according to Real Capital Analytics

Despite pressure from regulators companies like Guangzhou R&F Properties and Greenland Holdings continue to invest in the UK and Australia, respectively

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The Chinese government’s imposition of ‘three red lines’ on property developers has squeezed their ability to expand overseas. Photo: EPA-EFE

Cheryl Arcibal

Published: 10:00am, 24 Oct 2021Updated: 9:45pm, 24 Oct 2021

Chinese developers, who were among the most active investors in overseas property markets, have seen their investments slump this year and they are likely to remain depressed for many years, as Beijing cracks down on capital outflows and curbs risky borrowings to improve the sector’s financial health, according to analysts.

Their overseas investments have fallen to about US$1.9 billion so far this year, from a peak of US$17.5 billion in 2017, when they snapped up development sites, offices, industrial, retail, residential, hotel and senior housing and care projects in the US, UK and other parts of the world, according to data from Real Capital Analytics.

“With the capital outflow controls still in place, it is expected Chinese developers’ investment in overseas markets will remain low in the coming years,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank. “The ‘three red lines’ policy has been forcing mainland developers to deleverage and slow down their overall pace of expansion.”

Chinese developers will devote more resources in the mainland and Hong Kong rather than overseas destinations, he added.

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Evergrande debt crisis: How likely is it that bondholders can recoup their investments?

After Beijing introduced the “three red lines” in August last year, mainland developers have been scrambling to get their house in order to meet these requirements. Failure to meet these benchmarks cuts off access to new bank loans. Top developers like China Evergrande, the world’s most indebted real estate company, have been struggling to meet these red lines and have found it difficult to service debt and access new loans.