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Even State-Backed China Developers at Risk of Surging Default, Citi Says

  • SOE developers are biggest drivers of this year’s increase
  • Overall systemic risk is still ‘manageable’ for Chinese banks
Yango Headquarters and Developments in Shanghai Amid Property Debt Woes
Photographer: Qilai Shen/Bloomberg

Financial contagion has spread so far across China’s property industry that even state-backed developers are at risk of surging defaults, according to Citigroup Inc. analysts. 

Bad debt climbed to about 29.1% of total property loans in the first half of this year, up from 24.3% at the end of 2021, according to calculations by Citi’s team including Judy Zhang. The increase is largely attributable to developers controlled by the Chinese government, the analysis showed.