The crisis in China’s property market has bottomed out and the focus will switch soon to a gradual recovery, HSBC’s chief executive has said.
Noel Quinn predicted that “the bottom of the market” had been found because of interventions by the Chinese government. These have included measures to curb the over-supply of property, such as restrictions on land sales, and encouraging lower prices to spur demand.
China’s vast property sector has suffered a series of debt defaults since the end of 2021 and the turmoil has weighed heavily on the world’s second largest economy. Developers have been hit by falling sales and difficulties with their debts, prompting concerns about the fallout for the rest of the global economy. The industry has accounted for about a quarter of gross domestic product in China, the world’s second largest economy, and its woes have led to fears about lenders’ exposure to troubled property groups.
Quinn said: “[The Chinese authorities] went very deep and hard [with their interventions] over a short period of time. The negative policy measures that have changed the commercial real estate market in China have really been landed. From here on in, it’s a rebuild of that sector.”
He warned, though, that there would be no rapid comeback. “You should not equate the bottom of the market with no further issues,” he said. “There’s always a risk of some developers having further problems, but I do think the major correction is over and it’s now a case of a progressive workout over an extended period of time.”
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Quinn’s comments came as China Evergrande Group, the world’s most indebted developer, was given a final chance by a high court judge in Hong Kong to come up with a deal on its debt or face being wound up. The business, which has vast debts that total more than $340 billion, came close to collapse two years ago.
A winding-up hearing, initially scheduled for yesterday, was adjourned until December 4. Justice Linda Chan said it would be the last hearing before a decision was made.
In its latest figures, HSBC took a $500 million impairment charge related to the commercial property sector in mainland China, where its total exposure is about $13.6 billion.
Last week Standard Chartered, HSBC’s London-listed, Asia-focused competitor, reported an unexpected plunge of a third in its third-quarter profits because of a near-$1 billion combined hit from its exposure to China’s troubled property and banking sectors.
Quinn, 61, was speaking as HSBC announced its third-quarter results. Earlier, he had told Bloomberg TV, the business network: “It will take quite a while for that market to recover and regain momentum so I am not expecting a massive reversal in that sector in the next 12 months or so. But I do expect it to be a gradual improvement from where we are.”
