Top Chinese property firms are grappling with nearly $3 billion in forex losses this year, mainly due to U.S. dollar loans as the yuan weakens.
This adds more stress to their cash-strapped operations.
A study by Nikkei Asia shows 24 top Chinese firms lost 21.25 billion yuan ($2.75 billion) in the first half.
These paper losses highlight the risk of foreign currency debt.
Economist Alicia Garcia Herrero says the yuan is down because of increased cash flow from China’s central bank.
This makes dollar debts even harder to handle for these companies.
Yango Group was delisted from the Shenzhen stock exchange. CIFI Holdings failed to release mid-year earnings.
Evergrande topped the list with a 4.14 billion yuan forex loss.
Country Garden and Sunac China also suffered losses. Moody’s analyst Cedric Lai says this weakens investor trust.
Some state-owned firms are dodging the impact. China Resources Land is cutting its dollar debts.
Poly Developments and Longfor are using risk strategies to cope.
Ju Wang of BNP Paribas says China’s central bank won’t take big risks tied to currency shifts.
In summary, the falling yuan makes life harder for Chinese property firms. This adds new challenges to an already tough economic scene for these builders.
Background
The forex losses expose the fragile state of China’s real estate market. This sector is a cornerstone of China’s economy.
So, these losses could have a ripple effect. It’s clear that most companies did not prepare for a weakened yuan. Hence, they are now paying the price.
Higher forex losses can lead to more debt. More debt could make it harder to get new loans. Without new loans, companies can’t invest in new projects. This creates a vicious cycle.
State-owned companies seem more resilient. They have better access to domestic funding.
But this also raises questions about market fairness. Is the central bank supporting them more than private companies?
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