The billionaire owners of heavily-indebted Chinese property developers have used around $3.8 billion of their own money to rescue their companies from possible defaults, as a liquidity crises engulfs the industry, reports Bloomberg. The personal balance sheets of China’s property barons have become a major tool for investors to ascertain whether developers will meet their debt obligations. Founding chairmen of at least seven real estate companies have used their personal wealth in recent weeks to support the firms.
The efforts underscore how the liquidity crisis is more desperate than previous squeezes, when real estate firms were able to reap cash from sales blitzes or by offloading trophy assets. Now, with China’s home sales and prices falling, banks growing reluctant to lend, and yields in the offshore bond market soaring, many developers are counting on their founders as a last resort.
The magnates’ moves stand in contrast with counterparts overseas, where the concept of limited liability generally shields owners’ personal wealth from creditors’ claims. The boundary isn’t so clear in China.