Hottest Chinese Real Estate Bond Market is Collapsing

Chinese real estate junk debt has been one of the most profitable and popular corporate bond deals in the last ten years. Since the first bonds appeared in 1997, international institutions such as Credit Suisse Group and Goldman Sachs Group have flooded the market. Hong Kong is the window for the world capital to enter the Chinese real estate market. By 2018, this market was nearing its peak, and today a market that once held $203 billion is nearly dead as the offshore investors are absorbing most of the losses.

In the second half of 2020, the Chinese Communist Party (CCP) Government reset the leverage benchmarks that developers had to meet to borrow more money. In 2021, the CCP introduced reforms to centralize land for purchasing in dozens of cities. Coupled with the various lockdowns due to its zero-tolerance against the CCP virus policy, the real estate in China gradually declined. Chinese real estate giant Evergrande Real Estate Group started defaulting on its U.S. debt last December. Since then, one after another real estate groups have started defaulting on their loans. Since property projects have stalled, homebuyers have refused to pay their mortgages.

Street protests have sparked as the lies of bailouts within the CCP have collapsed. Over $100 billion of the market has evaporated, and there are no more deals to be arranged on the Hong Kong Stock Exchange. Big banks such as BlackRock and UBS, which invest in China’s real estate, are leading the way in significantly scaling back their investments.

China’s real estate collapse has triggered anxiety in the Hong Kong Stock Exchange. Confidence in the financial markets is lost. Foreign bondholders investing in Chinese real estate are at the mercy of the CCP Government policies as this would be a big disaster for Western investors in a free market.

Miles Guo warned investors in 2017 that all money invested in Communist China should leave as soon as possible, but any greedy person who wants to take a chance and has not yet left the market will eventually bear the price.