Shimao’s struggle highlights challenges in China’s real estate market

The attempt to auction extensive commercial land owned by the defaulted Shimao Group in Shenzhen faced failure for the second time earlier this month due to the absence of bidders. This underscores subdued demand in China’s property market. The 243,602 square meters of land, including partially constructed buildings, were listed at 10.4 billion yuan ($1.4 billion), a 20% reduction from the initial 13 billion yuan starting price in the first auction held in July. The Chinese real estate industry, marked by numerous corporate defaults since entering a debt crisis in mid-2021, is encountering difficulties in achieving stability amid a gloomy economic forecast. The Shenzhen land plots were initially acquired by Shanghai-based Shimao in 2017, intending to develop a new iconic complex in China’s tech hub, featuring the city’s tallest skyscraper. Shimao, which defaulted on its $11.8 billion offshore debt in July, is liquidating assets through sales or seizures by creditors. The land plots, assessed at 16.3 billion yuan, represent the most valuable assets auctioned by Chinese courts in seven years, according to media reports. Recent official data reveals a sharper decline in China’s government land sales revenue (25.4%) and property sales (20.33%) in October compared to the previous year, indicating that the crisis-hit sector is still grappling with efforts to recover. Government officials have intensified efforts to strengthen the real estate sector, implementing measures such as easing home purchase constraints and reducing borrowing expenses. But, none of the measures have had any substantial impact on the sector's recovery as of now.

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Shimao’s struggle highlights challenges in China’s real estate market

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