Amid reports Beijing is planning massive bailout, S&P predicts sales slump will heighten liquidity squeeze and trigger more defaults
The strike has ratcheted up the pressure on developers, who are already facing acute liquidity problems and who depend on customers paying upfront for homes off the plan to keep cash flowing through the business. The proceeds can be used to pay debts as well so the loss of this income will hit hard.
Beijing is clearly unnerved by recent developments. In the Communist party’s thinking, the stability of the property market affects social stability. This is particularly so in a year that President Xi Jinping is seeking an extraordinary third term as the leader at the party Congress in October. The fund would initially be set at 80bn yuan, according to a source quoted by Reuters. The state-owned China Construction Bank would contribute 50bn yuan, but the money would come from PBOC’s relending facility. If it was successful, other banks would follow suit with a target to raise up to 200-300bn yuan, the source added.prepares to reveal a long-awaited restructuring plan, promised by the end of July.
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