The woes of China's property market have led to a surge in defaults on wealth management products tied to real estate projects, angering retail investors and hitting an important source of funding for an already cash-strapped industry.
With property sales slowing sharply, 91.7 billion yuan ($14.4 billion) in real-estate-linked trust products failed to pay out dividends owed or otherwise meet obligations last year, double the 2020 total, according to Use Finance & Trust Research Institute. Instruments tied to real estate accounted for more than 60% of trust products in default, up from less than 10% in 2018.
Dozens of investors from across China protested in mid-March outside the Guangzhou head office of Cedar Holdings Group after it ran late on interest and principal payments on products it had guaranteed.
"I'm 81 years old. What am I going to do now?" one said.
Cedar, a private conglomerate with a portfolio ranging from apparel to chemicals that reported operating income of 233.4 billion yuan in 2020, has run into issues with multiple financial products since last year.
While the investments in question are linked to a wide range of underlying assets, the main culprits are believed to be trust products tied to real estate development projects in which Cedar held a stake. These can offer impressive yields as long as property prices keep rising, which made them popular among retail investors in a country with a hot real estate market.
Problems with these investments have sparked multiple protests recently. When reports came out in November that developer Kaisa Group could not make payments on wealth management products it had guaranteed, hundreds of investors gathered in Shenzhen, where the company is headquartered. Police ultimately stepped in to quell the demonstration.
https://asia.nikkei.com/Business/Finance/Defaults-on-wealth-management-products-double-in-China