China’s real estate sector has been swinging from crisis to crisis since 2020, when Beijing began cracking down on excessive borrowing by developers in a bid to rein in their high debt loads and curb runaway house prices.
Founded by entrepreneur Hui Wing Mau in 2001, Shimao develops large-scale residential and hotel projects across the country. It owns Shanghai Shimao International Plaza, one of the tallest skyscrapers located in the heart of Shanghai.
In March, the company estimated that its 2021 net profit had plunged around 62% from a year earlier, mainly due to the “challenging” environment facing the real estate sector. It then delayed releasing its 2021 results, citing lockdowns in Shanghai.
“Due to the significant changes in the macro environment of the real estate sector in China since the second half of 2021 and the impact of Covid-19, the Group has experienced a notable decline in its contract sales in recent months, which is expected to continue. in the short term until the real estate sector in China stabilizes,” Shimao said in the filing on Sunday.
The company added that it was trying to reach “out-of-court resolutions” with its creditors over its inability to make principal payments on other offshore platforms. debt. In the absence of an agreement, creditors could force the company to accelerate repayments.
The industry’s problems have been exacerbated by Beijing’s zero Covid policy and the slowing economy. China placed several of its major cities – including Shanghai – under strict lockdown earlier this year to tackle rising Covid cases, severely affecting business activity.
On Friday, a survey by the China Index Academy – a real estate research firm – showed new home prices in 100 cities fell more than 40% in the first half of this year, compared to the same period last year. last.
Although there are signs that sales fell less dramatically in June than in previous months, the road to the property sector’s recovery is likely to be “quite bumpy” as Beijing remains committed to its zero-Covid approach, Nomura analysts said in a note on Monday.