Thread by @RChoongWilkins

China’s property crisis is going to get much worse before it gets better. A 🧵.

The debt crunch at ‘better’ firms like Shimao is key signal of what’s to come, even now that massive uncertainties like Evergrande and Kaisa defaults are out of the way. 1/8

TLDR on China's property crisis: 2022 is not just going to be about how much property firms owe in debt – but who OWNS that debt. 2/8

As the economy slows, the property crackdown rolls on and the network of real estate trusts, weaker banks/FIs, suppliers, contractors, workers etc all suffer – there’s going to be a lot less willingness to grant property firms a break when they get behind on payments. 3/8

Look at Shimao: its unit declared in default by China Credit Trust. No regulator intervention. No negotiations over an extension. Just a notice.

That’s v different from a month ago when regulators were arranging extension talks between Shimao and trusts like Minsheng. 4/8

From this in mid December:
bloomberg.com/news/articles/…

to this in early January:
bloomberg.com/news/articles/… 5/8

While stronger trust firms (or ANY stronger creditors) may be able to weather a missed payment or two, other weaker companies will have increasingly little tolerance or capacity for this. 6/8

If you’re a smaller trust firm or supplier etc with weaker finances, offering payment extensions to property borrowers that might suffer a full on credit crisis down the line probably isn’t particularly appealing. And doing that hasn't necessarily worked out so far. 7/8

In 2022, we’re going to see creditors increasingly anxious to get back what they’re owed -- because their own tight finances mean they can’t afford to wait for repayments or to avoid the risk of becoming embroiled in a broader debt crisis at a borrower or both. 8/8