China’s Real Estate debt crisis just begins

Charlene Chu, renowned among China watchers for her warnings of a debt bubble during her tenure at Fitch Ratings, claims that the pain for Chinese real estate loans is just beginning.

China Evergrande Group and others have defaulted on a multitude of bonds as a result of Beijing’s sweeping crackdown on real estate leverage. According to Chu, a senior analyst at Autonomous Research, a division of Sanford C. Bernstein & Co., “we have 30 defaulting companies with total liabilities of approximately $1 trillion.”

While banks have the protection of collateral for their loans to developers, “things could get a lot uglier” if lenders begin to revalue the collateral at a lower value, Chu said in an interview for the One Decision podcast on June 15.

Chu, who was known at Fitch for warning in the early 2010s about debt risks in the shadow banking sector, stated, “We’re just so early in the process of these defaults occurring, and restructurings typically take quite a while.” We have not yet reached the point where we can say, “Okay, so what’s going to happen with that building?”

According to Chu, a greater threat exists if Chinese individuals default on property loans, a scenario made more likely by the rise in Chinese unemployment.

Earlier in her career, Chu worked at the Federal Reserve Bank of New York. She applauded the government’s efforts to stop developers’ excessive building campaign. She stated that the rate of construction was out of sync with national population trends.

“We must be mindful of China’s declining population,” she said. “The working-age population, which is essentially the property-consuming group, peaked in 2015 at 801 million people and has since declined by 20 million,” she said.

Globally, Chu saw little likelihood of a full-blown financial crisis, in part because Chinese banks are “very quietly working off a lot of this bad debt,” including 3.1 trillion yuan ($462 billion) in write-offs last year.

But as debt continues to expand across the economy, “it is one of the structural issues weighing on Chinese growth,” as stated by the author. Chu concluded, “We are entering an era in which China’s growth will be, at best, in the low to mid single digits.”

We created a guide on how to understand Real Estate marketing in China for you

We are familiar with the Chinese culture; Chinese homebuyers are extremely meticulous. If they find you to be reasonable, honest, polite, and friendly, they will not only return for additional business but also recommend you to their friends and family. In addition to relying heavily on their advisors and real estate agents to assist with property purchases, they conduct their own research on the countries and projects in which they wish to invest.

The most effective method of real estate advertising is word-of-mouth. Additionally, Chinese consumers are highly suspicious of advertising. Developing trusting relationships with the Chinese community is a time-consuming aspect of conducting business with them.
Indeed, relationships are sometimes more valuable than money, and if yours with Chinese buyers is strong, they may be willing to pay a bit more.

Respecting the importance of the Chinese family hierarchy is also essential, so make sure you communicate with every family member. In this instance, parents will be the decision’s primary opinion influencers.

Furthermore, influencers are significant in the real estate industry. Influencer marketing is extremely effective, as Chinese property buyers hold in high regard the opinions of those they perceive to have a higher status than themselves.

Optimize your digital marketing

First, sales agents do not engage in digital marketing; instead, they construct offline networks, which severely restricts their exposure without an online presence.

In a society so focused on the Internet, it is difficult for an agent to sell a project without online exposure. Chinese investors will conduct online research using Baidu or Wechat, as well as Google.

The discerning investor buys into your brand’s reputation. In terms of social media marketing, the most important platforms are WeChat, China’s most popular social network, and Baidu, a Chinese search engine optimization browser. It operates very differently from Facebook in that it focuses on sharing information within your group of friends as opposed to seeking maximum exposure to the world.

Chinese buyers constitute the fastest-growing segment of global property buyers. It is anticipated that Chinese overseas property transactions will reach $220 billion by 2020. China will continue to be one of the largest contributors to the global real estate market for the foreseeable future.

Why collaborate with us?

As foreign users cannot view Chinese information on WeChat/Baidu, it is extremely difficult for a foreign real estate company to penetrate the market.
It can be challenging for an international real estate agency to obtain a WeChat account.
Even if things appear challenging, which they actually are, we can assist you in establishing your real estate business in Chinese marketing. Don’t worry about navigating WeChat for the first time; assistance is always available from people like us.

We are the most prominent Web & Marketing Agency for China that you will find online. Our services include E-Commerce, SEO, advertising, Weibo, WeChat, WeChat Store, and PR. For additional information, please contact us here.

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DOT PROPERTY GROUP is a Digital Media Company that owns and operates 10 Websites (Property Online Portal), and Complimentary Offline Media Throughout South East Asia.

Dot Property sought to increase the Awareness of their Luxury Real Estate & Emigration Event in Shanghai’s prestigious ‘Super Brand Mall’ in Pudong.

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  1. Hello,
    I would like to partner with South Asia property developers. (thailand, malaysia, indonesia etc)
    I am an independant real agent in China

    1. Hello
      Thank you for sending this message
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