“Whatever it takes,” appears to have become the new mantra across global financial systems and with Chinese shadow banks under increasing pressure (as cash-for-commodity deal financing dries up and “hedge” losses mount on ‘surprise’ Yuan weakness), property developers are increasingly desperate for liquidity. The solution, as The FT reports, Chinese property companies are buying stakes in banks and raising fears that the country’s already stretched developers are trying to cosy up to their lenders. 10 Chinese developers, who have been active in recent bank IPOs, have invested an ‘unprecedented’ $3bn in their potential lifeline lenders.
As The FT reports, Chinese property developers are buying themselves a piggy bank:
Ten Chinese property companies have invested Rmb18.4bn ($3bn) in banks, according to the Financial News, an official newspaper published under the aegis of China’s central bank.
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Some of the developers are heavily indebted, sparking questions about the motivation for these deals, and specifically whether the property companies are hoping to use their links to the banks to obtain preferential financing.
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There had been some cross-pollination between Chinese developers and banks in the past, with China Resources and Shanghai-based Greenland holding investments in both. But there is no precedent in China for the flurry of recent tie-ups.
Moodys is unimpressed…
Rating agencies have so far taken a cautious view of the deals, noting that property developers are hoping to see benefits but that the investments are still small in scale.
“We don’t think they [the developers] expect to get funding from the banks directly, but they will be looking for opportunities for mortgage financing for their clients or financing for their contractors,†said Kaven Tsang of Moody’s.
How they are doing it? Through debt-financing ponzi of course…
