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China’s property crisis deepens as trust firm defaults, home prices drop

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  • Staff Report 

The fallout from China’s property sector continues to intensify, raising alarm bells about the potential ripple effects on the broader economy.

Zhongrong International Trust Co., a prominent trust firm with significant real estate investments, has reportedly missed payments on multiple investment products since last month, according to a senior official. This new development, coupled with a drop in new home prices for the first time this year, casts a shadow over the country’s economic prospects.

DiSanto Propane (Billboard)

While national home prices dipped by 0.2% month-on-month and 0.1% year-on-year, per National Bureau of Statistics data, smaller cities have felt a sharper downturn, with average new home prices in the smallest 35 cities surveyed declining year-on-year for the 17th consecutive month.

The fragile state of the property market, which historically represents roughly a quarter of China’s economy, presents a major concern. Major global banks, including Barclays, have revised China’s 2023 growth forecasts downward in light of recent data. While Beijing has so far staved off the repercussions of a property debt squeeze impacting its $57 trillion financial industry, the fresh wave of defaults sparks fears of widespread economic fallout. The persistent property downturn, alongside the cumulative effects of strict COVID-19 measures over the past three years, has led experts to predict further declines in home prices and sales.