The Chinese real estate market faces a long road to recovery despite progress in restructuring

In recent months, several major Chinese developers have received new approvals for their debt restructuring plans, with creditors accepting significant discounts in the hope of recovering the rest of their funds.

Analysts speak of a “positive signal”. Nevertheless, cash-strapped developers face ongoing liquidity problems and may be forced to make drastic price cuts to sell unsold properties.

In other words, the three-year slump in China’s real estate market shows no clear signs of resolution.

“Too much inventory, not enough confidence,” S&P said in a report in October. “Addressing this imbalance is key to improving China’s struggling real estate market. The market has moved in favor of homebuyers, but before they jump in they need signs that developers are doing well.”

The new plan includes $2.2 billion in new debt and $4.02 billion in mandatory convertible notes and perpetual securities. It provides little improvement in terms of recovery of funds but will “significantly improve outcomes for creditors compared to liquidation,” said Liu Yi, managing partner and head of the liquidation and reorganization team at Shanghai-based law firm Everbright.