Rating agency Fitch has cut its growth forecast for the Chinese economy due to a slowdown in the Chinese real estate market and fears over debt-buried real estate giant Evergrande.
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Following the COVID-19 pandemic, China’s economy had enjoyed a rapid economic rebound, but strict new regulations recently introduced by the country’s regulators caused a rush to reduce debt and contributed to Evergrande’s crisis.
The Chinese company’s shares have lost more than 80 percent of their value this year and had recovered Thursday after signaling it could repay at least some of its $300 billion debt.
Stock markets in any case fear a possible contagion in the world’s second-largest economy. According to Fitch growth could be 8.1% instead of 8.4% due to the slowdown in the real estate sector.
According to the CEO of HSBC, which has invested heavily in China, Evergrande’s problems will hurt the markets, but not on the bank.
Weakness in China’s real estate market has caused a loss of more than 20 percent of home values year-over-year. The slowdown has been due in part to tighter regulations by authorities seeking to curb rising prices and excessive corporate debt.
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