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Why Hidden Debt Is a Big Problem for China Developers

Construction in Qinghai as China Tells Bankers to Shore Up Property Market
Photographer: Qilai Shen/Bloomberg
Updated on

Turmoil in China’s junk bond market has been testing investors’ nerves -- and that’s just concerning the debt they knew about. First troubled property developers including China Evergrande Group, Kaisa Group Holdings Ltd., Fantasia Holdings Group and Agile Group Holdings were found to have lots of opaque liabilities that may or may not be reflected on their balance sheets, making it hard to assess true credit risks. Now concerns are mounting about the transparency of some of China’s better developers, including Logan Group Co. A spate of defaults -- most notably by Evergrande and Kaisa -- have undermined confidence in China’s economy and led to mounting pressure on developers to reveal their hidden leverage. At least one has committed to no longer issuing this type of debt. 

There are several ways, including: