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China Property Purge Hammers Weak Players While the Strong Gain

  • Evergrande grace period is ending, three others have defaulted
  • Shares of higher-rated companies rise amid policy support
China Evergrande Group's under-construction Riverside Palace development in Taicang, Jiangsu province, China. 

China Evergrande Group's under-construction Riverside Palace development in Taicang, Jiangsu province, China. 

Photographer: Qilai Shen/Bloomberg

China’s property sector is undergoing its biggest credit-market shakeout in years as policy makers try to clamp down on over-indebted developers without infecting their healthier rivals.

Companies with the worst balance sheets are getting crushed by a spike in borrowing costs, a phenomenon that’s intensifying this month as bills come due. At least three Chinese developers have defaulted in October, one may struggle to pay interest due Friday and another failed to get a three-month extension for a note maturing Monday. Then there’s China Evergrande Group, the whale in the dollar debt market which may default as soon as Saturday.