China’s real estate market is in the midst of a crisis, as seen by the struggles of the commercial real estate sector. This was exemplified by the failure to sell the iconic Shimao Shenzhen-Hong Kong International Center at auctions in July and November, despite a price cut of $360 million. The project was ambitious, with plans to build China’s tallest building at more than 700 meters high, only to be halted due to a debt crisis. The Shimao Group’s valuation of the asset currently stands at $2.28 billion, which represents a significant setback for the project, a landmark in Shenzhen’s real estate history.
The large-scale property complex covers 12 plots of land, with a total construction area of 15.6 million square feet. This project, which was to be the most valuable asset in a Chinese auction in nearly seven years, showcased Shimao Group’s vision for the Shimao Shenzhen-Hong Kong International Center. The project began in 2017 and was intended to include an international convention and exhibition center, smart offices, commercial areas, and apartments. As a result of the debt crisis, the construction was suspended, posing a major setback for the Shimao Group and its plans for the property.
The struggles of China’s commercial real estate sector also extended to the largest player, Wanda Commercial Management Company of the Dalian Wanda Group, as they face financial liquidity issues as well. To alleviate recent liquidity pressure, the company announced that it is seeking an extension for a scheduled U.S. dollar bond repayment of its subsidiary. The $600 million bond, set to mature in January 2024, could see its due date postponed to December 2024, with repayment in four installments.
These financial difficulties faced by the major commercial players reflect the current economic downturn in China’s real estate sector, which has created significant challenges for sales and new loans. This comes as real estate companies struggle to meet their debt and interest payments, and as challenging business conditions lead to uncertainty for the future. The debt crises are a testament to these challenges and magnify the uncertainties facing the real estate sector, thus presenting significant challenges for major companies such as Wanda’s chairman Wang Jianlin.