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A man rides a bike along residential and commercial properties in Beijing in September 2022. Photo: EPA-EFE

Massive correction in China’s commercial property market has two more years to run, HSBC CEO Quinn says

  • ‘It’s a faster correction and a more decisive one than I was expecting,’ CEO Quinn says at a conference
  • Time is needed for global capital markets to respond to policy tweaks by Chinese authorities to stabilise the sector
The “massive” correction to China’s commercial real estate market may have at least another two years to run, according to HSBC chief executive officer Noel Quinn.

“It’s a faster correction and a more decisive one than I was expecting, or I think anyone was expecting, and I think it’s got quite a while to go before it really stabilises,” Quinn said at a Bank of America conference on Tuesday. “You could be looking at another two plus years of correction.”

HSBC said last month it would take further charges against its more than US$12 billion of exposure to commercial real estate in China, where it is the biggest foreign bank, as a third of those assets are deemed substandard or impaired, chief financial officer Ewen Stevensoon said. The sector is nonetheless “modest” in the context of HSBC’s overall lending book, he added.


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HSBC last month reported a 61 per cent jump in net profit to US$5.49 billion in the three months ended June 30, beating the US$2.7 billion expected by analysts.
In a separate comment, Quinn said HSBC has sought advice on a proposed break-up of the banking group as instigated by major shareholder Ping An Insurance Group, and remains convinced that the move would damage the business.

China’s property developers posted their worst first-half earnings in over a decade, an outcome that is likely to pressure stocks further even as the government boosts efforts to stabilise the broader sector.

Quinn said he was encouraged by some of the policy changes that had taken place. However, these were aimed primarily at re-establishing the flow of domestic capital into the sector and it will take “quite some time for the international capital markets to rebalance towards that in a positive way,” he added.

A clampdown on leverage, China’s strict zero-Covid policy and a weakening economy are to blame for much of the fallout in the sector this year. Government plans to lower mortgage rates and offer guarantees on some coming onshore bond offerings have done little to lift sentiment.
Country Garden, China’s biggest developer by sales, last month predicted more pain for the real estate industry after posting a record drop in first-half profit.

Additional reporting by SCMP