According to the ratings agency, three businesses are most vulnerable if the real estate problems persist.
Since last year, investors have been concerned that the financial problems of Chinese property developers could affect the rest of the economy. While China's economic growth slows, many homebuyers refuse to pay their mortgages, bringing developers' problems back to the forefront.
If policy intervention doesn't materialise, distress in the property market will continue and have effects on other sectors in China beyond the property sector's immediate value chain.
The impact of a stress scenario on more than 30 kinds of businesses and government entities was analyzed. Three of them are vulnerable to real estate's troubles.
This is the first thing. There are companies that manage assets.
The report said that these firms hold a lot of assets that are backed by real estate.
There are two Construction firms are not owned by the state.
The sector has been in trouble for a while. The report said that they don't have competitive advantages in infrastructure project exposure or funding access compared to their government- related peers.
There are three. Steel producers that are smaller.
The report said that many have been operating at a loss for a few months and that if China's economy continues to be sluggish, they could face a shortage of funds.
Construction accounts for more than half of China's steel demand, according to a report.
The furniture sales component of retail sales has been negatively affected by the real estate downturn.
Fitch believes the recent rise in the number of homebuyers suspending mortgage payments over stalled projects underlines the potential for China’s property crisis to deepen...
Residential housing sales fell by 32% in the first half of the year, according to official data. According to the report, industry research shows that the 100 largest developers saw their sales decline by 50%.
Deterioration in homebuyers' confidence could stall the sales recovery we saw in May and June.
Many home buyers have stopped mortgage payments to protest construction delays for apartments they already paid for, putting future sales and cash flow at risk. The homes are usually sold by the developers before they are finished.
The recent rise in the number of homebuyers suspending mortgage payments over stalled projects underscores the potential for China's property crisis to deepen, as diminishing confidence could stall the sector's recovery, which will eventually ripple through the domestic economy, according to a report.
Large and central government-affiliated businesses are less vulnerable to a decline in real estate than smaller firms are.
Small and regional banks make up about 30% of the banking system assets. If authorities relax requirements for lending to troubled real estate developers, the risks for Chinese banks will increase.
Insurers, food and beverage companies, power grid operators and national oil companies were the least vulnerable businesses according to the report.
Two years ago, Beijing began to crack down on the companies' high reliance on debt for growth.
The real estate problems are shown by the number of vacancies.
According to a report last week by Beike Research Institute, the average residential property vacancy rate in China was 12%.
That is second only to Japan, and higher than the US.
The report said that if there were strong expectations of falling house prices, the empty apartments could make the market oversupply worse.
Many local governments relaxed homebuying restrictions this year in an effort to prop up the real estate sector.
Beijing has not yet announced large-scale support.
Even if the authorities intervene aggressively, there's a risk that new homebuyers will not respond positively to this, particularly if house prices continue to fall, and the economic outlook is clouded by global economic weakness.
It would take more than one event to cause the stress scenario in the report to come to pass.
If weak market sentiment continues for the rest of the year, the industries analyzed could be negatively affected.
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