China’s Developers Face $12bn in Trust Payments in December

Chinese developers face $12bn in trust payments due in December. Bloomberg notes that Chinese developers have already this year defaulted on more than $10bn of trust products that are high-yielding, short-term products,” which had been deemed to be a legitimate, safe and predictable place to park money for mainly wealthy Chinese and institutions”. This comes over and above ~$10.9bn of potential losses in other wealth products by developers that including Evergrande. The trust products market is worth about $3tn and can pressurize policy makers to ease liquidity issues to avert a dramatic slowdown in the economy as real estate accounts for about 15% of GDP. New trust issuance has slumped to about $6.8bn YTD, a record low as trusts slashed loans to developers by 17% YoY by mid-2021. Guosheng Securities adds that besides the December payments, repayment pressure will only build in March, May and June 2022 as more than RMB 50bn ($7.9bn) of trusts expire in each of those months. Data doesn’t identify the names of the developers that have upcoming payments, but among trust firms, Everbright Trust and Minmetals International Trust Co., have the most products expiring over the next two months, with over RMB 10bn ($1.6bn) each in project financing. This comes on the top of $1.3bn in bond payments due by Chinese Developers in December, that continues to burden developers’ finances.