With weak buying confidence and a mortgage boycott, banks in China are at risk of losing $350 billion in the Great Wall nation's real estate market.
Worsening the situation further, the policies implemented by the authorities in controlling the economic turmoil also put pressure on banks in China.
According to People's Bank of China data, mortgage arrears of banks in China reached 39 trillion Yuan and loans to developers at 13 trillion Yuan since the end of March.
The streak, S&P Global Ratings projected, saw Chinese banks face a risk of mortgage losses of 6.4% or $356 billion while Deutsche Bank AG predicted they might experience a 7% decline in home loans.
So far the listed banks have reported outstanding mortgages of 2.1 billion Yuan as a result of the boycott.
Commenting professor of finance at the Hong Kong Business School, Zhiwu Chen, the current situation is not in favor of Chinese banks.
If the bank decides not to help the developer complete the project, they will suffer losses while if they channel the funds anyway, the risk of delay is greater.
In general, banks' exposure in China covers the largest real estate sector compared to other industries.
Meanwhile, the Evergrande Group Ltd unit has been asked to pay creditors 7.3 billion Yuan following its failure to settle debt obligations.
Citing sources from a filing on the Hong Kong stock exchange, an unnamed creditor has guaranteed the borrowing of certain entities controlled by Evergrande in July 2021.
As a result, to fulfill the outstanding debt obligations the unit has been demanded with the amount of the payment.
