Key Charts - Size and Structure
Overbuilding Has Chinese Skyscrapers Teetering
- In 2012, the Chinese government liberalized interest rates, clamped down on property price increases, limited government agency spending and imposed new rules on lending, causing funding to flow into real estate. One-third of total lending in 2013 went to the housing market.
- Chinaís real estate market is crucial to its economy, but structural overbuilding has caused major defaults. Zhejiang Xingrun Real Estate, a major property developer, defaulted this year on $567 million in debt owed to more than 15 banks.
- Because so much investor wealth depends on the continual expansion of real estate, it is likely that as these fissures appear more frequently, the Chinese government will continue to bail companies out.
Sources: Bloomberg, Nomura, Milken Institute.
Notes: Loans from large and middle-market banks, including ICBC, Bank of China, BoAg, BoCom, China Construction Bank, China Merchants, Minsheng, Everbright, and Citic. "Govít" refers to regional and local government, while "M&M" stands for metals and mining.