China’s real estate crisis is a bit like a black hole. While government censorship and the opacity and unreliability of economic statistics make it difficult to see what lies at its centre, the way it has bent and mis-shapen the world is clear enough. What is now categorical is that a debt-fuelled property bubble has burst, leaving two of China’s largest real estate companies, Evergrande and Country Garden, on the brink of bankruptcy as rows of unfinished sky-high apartment blocks sit empty.
Tip style
Sell
Risk rating
High
Timescale
Medium Term
Bull points
- Strong brand and history
- Non-transactional work holding up
Bear points
- Global property downturn
- Rising costs
- Thinning cash flow
- Weaker balance sheet
The crisis is also causing waves for UK and European companies. While some are indirectly exposed to falling demand in the Chinese economy, others are directly sucked into the mess.