In many parts of China, real estate developers owe money to migrant workers, but it’s being collected by contractors’ debt collection, making the situation worse.
According to Bloomberg’s estimation, the Chinese real estate industry needs at least US$197 billion in January to meet its bond obligations, pay off deferred wages to migrant workers, and cover coupons and trust products.
The property sector has seen low demand in recent months. Still, developers push for completion, which will affect the cash flow. It is difficult for these firms to pay off their dues.
Jinke Group responded that on January 27th, about a hundred angry people came to the headquarters of Jinke in Chongqing’s Liangjiang New Area to demand their wages. As a result, Jinke, Greenland, Jinke (Hunan), Yuzhou (Wuhan), Long Lake, Blue Light Group, and Wonderful Land were all vandalized at the company’s front desk.
Employees put up banners demanding wages outside these companies.
The group plans to lay off more than 1,000 employees.
An insider in the mainland real estate industry told Chinese language media Da Ji Yuan on January 29th that many property developers will face construction debt in January.
The project companies under Rongchuang began to fail to pay the due commercial paper in late December.
In China’s real estate industry, contractors and suppliers of building and construction materials have been paying for construction projects in advance for many years. But in an age of high leverage and high returns, the problem may not be as prominent.
An insider said the problem is that the market is not selling now, and the investor’s capital chain is tight, so there is no way to pay for the project.
The insider said that development companies under state-owned enterprises and local governments also owe project money.
“Migrant workers come to ask for money because they hope that the company will have a specific payment schedule, but the company is crowded with people like in Jinghong, and it can’t be solved. The local government can’t even pay civil servants. Can it manage other things?” the insider said.