China’s property developers may come under closer scrutiny for violating environmental laws as Beijing ramps up efforts to strengthen the rules, according to a portfolio manager.
The latest move by the Chinese government to order property developers in debt China Evergrande arrive demolish 39 buildings Teresa Kong, head of fixed income at investment firm Matthews Asia, said their Ocean Flower Island project has surprised many people.
“I think it definitely surprised both the company and the investors. The government has been very vocal about the implementation of environmental policies,” she told CNBC’s “Squawk Box Asia” on Thursday. Private.
Huayang Island is an artificial archipelago in Danzhou, Hainan that has been called “the world’s largest island” by Chinese state media. Follow The Wall Street JournalLast month, the Danzhou government said the island had damaged the marine environment, and was partly responsible for causing widespread damage to coral reefs.
Kong said it’s possible not only Evergrande could follow environmental rules – but also “other capable property developers.”
Kong notes: “Environmental wildcards are something that we should be looking at – not only for developers, but for many other industries that are really under scrutiny, because China are really strengthening environmental protection.”
Evergrande, China’s second largest developer by sales in 2020, is China’s largest real estate developer through offshore issuance of US dollar debt, at $19 billion la last year. The developer has got the total $300 billion in liabilities like last year and is on the verge of collapse.
Mr. Kong said China’s environmental protection law is not entirely new. However, as the country ramps up efforts to ensure implementation, companies that don’t follow the rules as rigorously will “get the kind of scrutiny they deserve,” she added.
In the long term, the real estate sector still has a lot of growth. This is an important area for China’s overall GDP.
Teresa Kong
Head of Fixed Income, Matthews Asia
Evergrande also said on Tuesday that it “will continue to actively maintain contact with creditors, strive to address risks and protect the legitimate rights and interests of all parties.”
S&P Global Ratings warned in November that a Evergrande default is “very likely” because the company is no longer able to sell new homes.
Despite the company’s difficulties, Kong remains optimistic about China’s overall real estate sector in the long term.
“If you look at China’s position in terms of urbanization rate, it’s only hit the 60 percent mark,” she said, adding that it was still far behind the US and Japan.
Mr. Kong added: “So from a long-term perspective, the real estate sector still has a lot of growth. This is an important area for China’s overall GDP.”
– Evelyn Cheng of CNBC contributed to this report.
