Underwater Mortgages Force China’s Banks to Get More Creative

China is experiencing its longest property downturn on record, with home prices down sharply from peak levels and developments such as the semi-abandoned 'Life in Venice' complex in Qidong illustrating the distress. The prolonged slump raises downside risks to developers' balance sheets, bank asset quality and broader economic growth, increasing pressure on credit markets and emerging-market sentiment.

Analysis

China is experiencing its longest property downturn on record, with home prices down sharply from peak levels and developments such as the semi-abandoned 'Life in Venice' complex in Qidong illustrating the distress. The prolonged slump raises downside risks to developers' balance sheets, bank asset quality and broader economic growth, increasing pressure on credit markets and emerging-market sentiment.