The current problems in the Chinese real estate market may be fraught with consequences for the American economy, according to the US Federal Reserve System (FRS). This is stated in the semi-annual report of the regulator on financial stability, published on November 8.
“Given the size of China’s economy and financial system <…> financial difficulties in China could put pressure on global financial markets due to deteriorating investor sentiment, threaten global economic growth and affect the United States, ”the document says.
The Fed refers to the high level of debt of Chinese companies and regional authorities, as well as a significant debt burden on the financial sector, especially in small and medium-sized banks. In these conditions, the increased attention of Chinese regulators to indebted organizations may cause problems for companies with a high debt burden, especially in the real estate sector.
The Fed cited the example of the case of the construction giant China Evergrande, which was on the verge of bankruptcy and is now negotiating debt restructuring with investment banks and creditors. The situation around Evergrande has triggered defaults on offshore bonds, downgrades of the credit ratings of some other developers and sales of stocks and bonds by companies. On Tuesday, November 9, Fitch Ratings downgraded the long-term rating of major real estate developer Kaisa to CCC- due to high credit risks.
In October, it became known that a large-scale anti-corruption check was carried out in financial departments, the largest state-owned banks and insurance companies in China. In total, it is planned to check 25 organizations, including the Banking and Insurance Regulatory Commission.
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