Only 0.6% of defaulted offshore China property bonds recovered...China’s biggest banks to raise $72bn...China pledges improved EV market oversight
Only 0.6% of defaulted offshore China property bonds recovered
International bondholders have recovered less than 1% of nearly $150 billion of bonds defaulted on by China’s property developers since 2021, despite years of negotiations and nearly a dozen restructuring agreements, reports the Financial Times. Just $917 million in cash has been transferred to investors in offshore bonds across 62 developers in that period, according to an analysis of restructuring data from Debtwire, equivalent to 0.6% of the $147 billion in defaults recorded.
Only three developers—China Fortune Land Development, China South City and RiseSun Real Estate Development—have made any cash coupon payments across 11 restructuring agreements for $39 billion in debt, as mainland property businesses struggle to generate income.
The data highlights the difficulties for international investors in recovering money from any of their holdings in Chinese developers, which borrowed heavily on overseas markets during a boom that unravelled following the default of Evergrande in 2021.
China’s biggest banks to raise $72bn
Four of China’s biggest banks will raise a combined RMB 520 billion ($72 billion) through share sales to investors including the Ministry of Finance, as Beijing seeks to shore up its vast banking sector against pressing economic woes, reports the Financial Times. Bank of China, Bank of Communications, Postal Savings Bank of China and China Construction Bank said they would raise RMB 165 billion, RMB 120 billion, RMB 130 billion and RMB 105 billion respectively in stock exchange filings on Sunday.
The Ministry of Finance will be a major investor in the capital raise by the four banks, which are all state-owned and collectively had about RMB 10 trillion in capital as of last June.
The rare government-directed injections will increase the banks’ core tier one capital—a gauge of equity that regulators use to limit leverage—and are part of a series of official support measures that have since last September aimed to restore confidence in the world’s second-largest economy.
China pledges improved EV market oversight
China has pledged to improve oversight of the country’s electric vehicle (EV) market to curb undercutting and boost the industry’s overall fortunes, where only three EV makers are currently profitable, reports the South China Morning Post. Zheng Bei, deputy head of the National Development and Reform Commission (NDRC), mainland China’s economic planning agency, told the China EV 100 forum in Beijing at the weekend that companies resorting to unfair competition would be taken to task if their price cuts were considered unreasonable.
The unfair practices also include the publication of false information to mislead consumers and smear campaigns.
“We will collaborate with the relevant authorities to implement the policies,” Zhang said. “To maintain market order, price monitoring will be strengthened and carmakers are urged to conduct self-discipline [in adjusting prices].”
China non-fossil-fuel capacity tops 2,000GW
China’s installed non-fossil-fuel power capacity has surpassed 2,000 gigawatts for the first time, as the world’s biggest carbon emitter continues a strong push into renewable energy that is cementing its major role in the global clean energy drive, reports the South China Morning Post. Data from the China Electricity Council shows the installed capacity rose 23.3% year on year by the end of last month, with non-fossil fuels now accounting for 58.8% of China’s total installed power capacity, edging closer to Beijing’s 60% target for this year.
Since the launch of the latest five-year plan in 2021, capacity in the sector has more than doubled, Xinhua reported on Thursday.
China is ramping up non-fossil energy development to achieve its goal of carbon neutrality by 2060. The push is also a strategic move to reduce heavy reliance on oil imports and curb massive coal consumption.
CNOOC discovers 100mn-ton oilfield
The China National Offshore Oil Corporation (CNOOC) has discovered an oilfield in the South China Sea with proven reserves exceeding 100 million tonnes, Xinhua news agency reported on Monday, reports Reuters. The newly found Huizhou 19-6 oilfield is not in a disputed part of the South China Sea and lies within China's Exclusive Economic Zone, which runs for 200 nautical miles or 370 km from its coast.
The oilfield, around 170 km (106 miles) off the coast of Shenzhen, sits at an average water depth of 100 metres, the report said, adding that test drilling has yielded a daily production of 413 barrels of crude oil and 68,000 cubic metres of natural gas.
Huizhou 19-6 is China's first large-scale integrated clastic oilfield in the deep to ultra-deep layers, the report said. Such reserves are challenging for oil and gas exploration, given the high temperatures and pressures exerted at these depths.
Broken bonds
International bondholders have recovered only 0.6% of the $147 billion in defaulted offshore bonds from China’s struggling property developers. Despite years of negotiations and a number of restructuring agreements, only $917 million in cash has been handed over to offshore investors.
At the heart of this is the property market crisis which has been in effect now for four years and doesn’t show any sign of recovery. And there isn’t likely to be any major changes in cash outflows any time soon, given that onshore debt hugely overshadows offshore debt, and the former is likely to be the priority for the system.
What are the consequences of this? If they do not repay these debts then it is highly unlikely that they will find it easy to find future lines of credit outside of China, and in the end it will have a large negative impact is China’s reputation in the financial markets around the world.