China Braces For Mass Defaults

Sinic Holdings Group has become the latest to warn of default as the property market in China seemingly turns cold.

The Shanghai-based developer said in a filing that it doesn’t expect to repay a $250 million dollar bond due Oct. 18 with $694 million in dollar bonds outstanding.

That follows a default by Fantasia with Modern Land trying to delay deadlines in what might be classed as a default.

Evergrande has missed a third bond payment, with $150 million due on Monday not paid to bondholders in time.

Overall there’s an estimated $92.3 billion due next year in bond payments by Chinese developers with many on the brink of officially defaulting.

Evergrande is the most in debt, owing some $300 billion in addition to billions more off-book in things like commercial paper.

Chinese authorities there have began an inspection of state banks and financial regulators, ostensibly to root out corruption, with a protest held recently in front of Ping An Bank.

Some worry the property crisis may spread into a banking liquidity crisis as the financial system there has extended loans to property developers and investors in property.

Defaults thus may translate to systemic losses, with the stock market in China continuing to fall albeit at a slower pace.

Bitcoin in contrast rose to almost touch $58,000 with it currently trading at $57,000, a near 50% increase from its recent low of $40,000.

The property crisis in China is one contributor to this rise with bitcoin’s price mainly increasing during morning in Shanghai when it began moving upwards.

China has bank blockaded crypto but some say that might only increase demand for decentralized finance (defi) where bitcoin is available in a tokenized form and can trade against tokenized usd without an intermediary.

The holding or trading of bitcoin, moreover, is not banned there, only the buying and selling of it in the course of business.

Interestingly CNY is kind of sidewaying against the dollar since June with it trading at 6.4 per usd. This is softly pegged to the dollar, so it is not quite the market passing judgment but more PBOC policy to let it strengthen.

There’s concerns the peg would fall off if a proper crisis develops, with it anyone’s guess which way CNY would go in that situation as it would depend on the circumstances.

However with property now a risky investment in China, it may be less devaluation and more diversification driving some of them to invest in bitcoin as three decades of debt fueled boom now demand interest payments.