Can China’s Real Estate Boom Keep Going?
December 15, 2020
China’s real estate construction and sales played a key part in the nation’s rapid economic recovery after the pandemic, but analysts are concerned that they may not be able to maintain the same pace next year.
According to a Wall Street Journal report, several of the nation’s largest developers are over-leveraged. The nation has three “red lines” which represent problematic leverage ratios. Most major developers breach at least one, and some of the largest breach all three. This means that these companies may have trouble borrowing in the future, leaving them unable to buy land and finance construction.
Analysts expect land-sales revenue to increase just 5% next year, down from 9% this year, and the slowest rate of increase in five years.
While this will be largely a domestic issue, a slowdown in construction could prove to be a major headwind for industrial metals and other construction commodities.