Chinese property developers have been hit by record numbers of downgrades from international credit rating agencies this year, as Evergrande’s collapse fuels concerns over the health of China’s economy.
The downgrades come after Beijing introduced measures last year to cool an overheating property market and a liquidity crisis that is threatening to spread to more trusted borrowers.
Moody’s, Fitch, and S&P downgraded Chinese developers’ ratings 43, 54 and 30 times, respectively, in 2021, compared with six, 12, and 11 in 2020, adding further pressure on their ability to refinance offshore debt during a housing slowdown.
A Financial Times data analysis of the biggest borrowers shows that while riskier developers were subjected to significant downgrades in the past year, the ratings of investment-grade companies were largely unchanged. Credit ratings of triple B minus and higher are investment grade, while those below are high yield.
Buoyed by China’s rapid urbanisation, the country’s real estate developers are large borrowers domestically and overseas, and in Asia they make up a big portion of the region’s $400bn corporate high-yield bond market. They came under stress after Chinese president Xi Jinping’s government moved to constrain their leverage over fears of asset bubbles in the property sector.