China’s Scrutiny of Shadow Debt Bites Developers Like Evergrande
- Developers’ off-balance sheet debt growth could slow down
- Off-balance sheet debt issuance slows in off-shore markets
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A tightening of Chinese developers’ use of secretive funding is threatening to curb growth in the world’s second-largest economy.
For years, China’s property developers have drawn on shadowy pools of capital to fund their projects. Now, government scrutiny is reining in that system, after already curbing traditional avenues of funding. Debt-laden developers including China Evergrande Group will likely need to scale back growth and resort to other means such as equity financing and spinning off more assets for financing to avoid defaults.