China’s year-long campaign to control real estate prices has dealt a heavy blow to the country’s property tycoons. Their assets have plummeted as China’s home sales have fallen for 11 consecutive months.
Liberty Times Net citing Bloomberg statistics reported that China’s real estate tycoons lost nearly 65 billion dollars during the period.
On June 6, Bloomberg’s index of Chinese property stocks plunged to a five-year low.
According to Bloomberg, Chinese President Xi Jinping’s determination to achieve “common prosperity” signaled the end of the era of China’s property billionaire factory.
Craig Botham is chief China economist of Pantheon Macroeconomics Ltd. He said that the golden days are over. Property is no longer the engine for China’s economic growth or wealth accumulation. It’s a thing of the past.
The real estate sector accounts for nearly 30% of China’s total gross domestic product. It has once been one of the main economic drivers and created legendary names like Wang Jianlin, founder of Wanda Group, or Hui Ka Yan, founder of China Evergrande Group.
These figures have been underpinning the wealth of China’s middle class and accounting for about 60% of household assets.
Since the early 2000s, home prices in China had been on an upward trend, so property was surely a good investment channel for two decades.
Chinese real estate developers were eager to take on debt, turning to vast sources of money outside of China. Their high-yield bonds attracted a lot of international investors.
But the authorities noticed significant risks that the developers’ mounting debts posed to the financial system.
In 2016, President Xi Jinping Xi declared that houses are built for inhabitation, not for speculation. Then everything began to change.
In 2020, China accelerated its regulatory crackdowns. The government set out “three red lines” for the developers, limiting the amount of loans developers could take on.
The crackdown bust pinched developers across the board and crushed Evergrande. The developer giant, with more than 300 billion dollars in liabilities, defaulted in December 2021 after it lurched from one missed payment deadline to another.
Evergrande’s debt crisis then quickly led to a wave of defaults in China’s real estate sector.
Since the beginning of 2021, Chinese developers have defaulted on at least 18 billion dollars of offshore dollar bonds and 2.5 billion dollars of onshore yuan-denominated bonds.
The shifting winds in the real estate sector have also destructed the wealth of real estate tycoons.
Evergrande founder Hui Ka Yan’s net worth was about 30.1 billion dollars on December 31, 2019. But according to Bloomberg, his wealth dropped to 6.2 billion dollars as of May 31, 2022, or a sharp drop of 23,9 billion dollars.
Wanda Group founder Wang Jianlin also saw his assets shrink by 10.5 billion dollars in the past two and a half years, to 6.7 billion dollars.
Since the end of 2019, Sunac China Holdings founder Sun Hongbin saw nearly 90% of his fortune evaporate.