Recent volatility in the Chinese currency has rekindled fears over the growing exposure of PRC property developers to overseas debt. In the past two years, Chinese developers have issued US$40bn in foreign currency bonds. The China property sector now accounts for some 40% of Asia's two biggest high-yield debt benchmarks, the Merrill Lynch and the JP Morgan Asian Credit indices. Chinese borrowers have enjoyed an additional benefit of borrowing overseas, as exchange rates have moved in their favour. However, the recent reversal in the renminbi has raised concerns over the rapid growth of unhedged forex liabilities of companies that generate all their income in local currency. Analysts warn that the overseas borrowing binge has become unsustainable. In a report last Thursday, Standard & Poor's warned that sales were no longer growing as fast as the sector's liabilities.
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