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Default Risks Rise in $355 Billion China Builder Bond Market

  • At least 4 property-related firms defaulted on bonds in 2018
  • S&P expects defaults to rise, asks investors to be cautious
Construction of Residential Buildings Ahead of China New Home Prices
Photographer: Qilai Shen/Bloomberg
Updated on

Investors are bracing for more debt defaults among China’s cash-squeezed real estate developers as funding costs surge and refinancing pressure intensifies.

Borrowing costs in dollars for China’s high-yield issuers, most of whom are property developers, almost doubled this year to 11.2 percent, the highest in about four years, ICE BofAML indexes show. To make things worse, the sector faces a record $18 billion bond maturities in both onshore and offshore markets in the first quarter of 2019. That number is expected to double if investors demand early repayment on some of these notes, according to Bloomberg-compiled data.