China's property developers have more than big bond payments coming up
Fitch expects the yuan to weaken to 6.7 versus the U.S. dollar by the end of next year, analysts said in a report Thursday.The Nomura analysts pointed out another looming repayment deadline for Chinese real estate developers is deferred wages for construction workers, which are due before the Lunar New Year, which kicks off on Jan. 31.
"Unlike other sectors, the construction sector pays a majority of migrant workers' annual compensation right before the end of each lunar year," the analysts said. "Based on our informal survey, deferred wages account around two-thirds of their annual pay." The analysts estimate about 1.1 trillion yuan in deferred wages is owed to construction workers by private developers. The report noted that paying these construction workers in time is especially critical for developers this time around since the central government has emphasized that stability — including social stability — is a priority next year.
"Failing to pay deferred wages could be severely punished by both the central government and related local governments," the analysts said, adding that "there is tremendous reputational risk for those developers and constructors that could not pay deferred wages in a timely manner, especially if social protests are triggered."
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