Defaults on Chinese offshore corporate bonds hit a record $46.5 billion (TW$1.42 trillion) last year, and foreign creditors have been trying to recover funds from defaulting developers, only to be thwarted by developers' lengthy debt restructuring processes and lawsuits.

The picture shows the construction project of Evergrande Group that broke the contract.

(Associated Press)

[Compile Lu Yongshan/Comprehensive Report] Bloomberg reported that the collapse of China's real estate market has entered its third year. The outbreak of default on US dollar bonds issued by many developers has thrown China's US$735 billion offshore bond market into turmoil. Global creditors have been trying to Recovering funds from defaulting developers, only to be thwarted by a lengthy debt restructuring process and lawsuits by developers.

Some foreign creditors have called on Chinese regulators to step in as they fall behind their peers in China, and many have even petitioned the courts to liquidate developers' assets to pay their debts, but this is a risky legal move that could spark development It is counterproductive to sell at a low price.

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Despite recent progress on a series of debt restructuring proposals, a plan unveiled last week by Evergrande Group, China's largest developer, raised concerns that it could take years for investors to collect funds.

According to one of the options announced by Evergrande Group, the company will propose to replace old debt with new debt, with a maturity period of up to 12 years.

Nomura said in a report that the plan set a low bar but could help speed up the implementation of other plans.

Creditors are struggling to recover their funds, underscoring not only the challenges foreign investors face in the world's second-largest credit market, but also Beijing's inability to end a crisis that has brought down some big developers.

Goldman Sachs said that although the Chinese government has recently resorted to a series of measures to support the real estate sector, the continued liquidity crunch means that defaults will increase in the short term.

According to data compiled by Bloomberg, the default amount of China’s offshore corporate bonds reached a record US$46.5 billion (NT$1.42 trillion) last year. Last year, more than 140 domestic and foreign corporate bonds issued by developers defaulted, and the default amount was as high as 500 million. One hundred million U.S. dollars.

"We have never seen so many cases of default in China for many years. It is difficult for us to use the benchmark of the past. This is the moment to set a precedent," said Zhang Jihao, chief corporate rating of S&P Greater China.

China's high-yield dollar debt, which is dominated by corporate debt issued by developers, is expected to post its biggest drop since October last month, largely as hopes for a quick recovery in the country's property market fade.

Even if Evergrande Group announced its debt restructuring plan, the market value of most of its US dollar bonds is less than 10% of the face value.

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