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More than 50 Chinese property developers have defaulted on debts since 2021. They have refused to repay overseas creditors while still making arrangements with Chinese banks for possible eventual repayment.
Many of these developers have shares listed on the Hong Kong stock market or have borrowed there, or both. But creditors face formidable obstacles in seeking to recover loans from Chinese real estate developers through petitions to the court system in Hong Kong, said Zerlina Zeng, the head of East Asia corporate credits at CreditSights, a global credit research firm.
Most of the assets of Chinese developers are in mainland China, where courts might not recognize liquidation orders from Hong Kong. Even if mainland courts order liquidation sales of developers’ buildings, China’s increasingly strict limits on moving money out of the mainland could make it hard for creditors to lay their hands on the proceeds of those sales.
“We do not think that the winding up order would manage to improve the recovery rate” for debt repayment, Ms. Zeng said.
Country Garden essentially ran out of money last October to repay debts. Households in China have cut back sharply on purchases of apartments from private-sector developers like Country Garden as housing prices have slid steeply over the past two years.
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