Goldman Sachs expects more China real estate defaults, switches to bear case

Key Points

• Twenty-two China high-yield bond issuers, all related to the property sector, have either defaulted on their U.S. dollar-denominated bonds or deferred repayment with bond exchanges since the start of this year, Goldman Sachs analysts Kenneth Ho and Chakki Ting wrote in a report Friday.
• Given the pick up in stresses, we raise our FY22 China Property HY default rate forecast to 31.6% (from 19.0% previously), which was our previous bear case assumption, the analysts said.
• This month, Chinese authorities cut mortgage rates and a benchmark for those rates in an attempt to support the massive real estate sector.

Real estate and related industries account for more than a quarter of China's economy, according to Moody's estimates.

CFOTO | Future Publishing | Getty Images

BEIJING Chinese real estate defaults have increased so much that Goldman Sachs analysts have shifted to their worst-case scenario for the riskiest part of the market.

Twenty-two China high-yield bond issuers, all related to the property sector, have either defaulted on their U.S. dollar-denominated bonds or deferred repayment with bond exchanges since the start of this year, analysts Kenneth Ho and Chakki Ting wrote in a report Friday.

Given the pick up in stresses, we raise our FY22 China Property HY default rate forecast to 31.6% (from 19.0% previously), which was our previous bear case assumption, the analysts said.