HONG KONG (BLOOMBERG) - China's property firms are set for a difficult January as the authorities in Beijing pressure the industry to pay millions of workers on time.
On top of increasing offshore bond bills, developers and their contractors need to pay 1.1 trillion yuan (S$236 billion) in deferred wages to migrant construction workers by the end of the Lunar Year, according to Nomura International (Hong Kong) estimates.
That falls on Jan 31 next year.
Earlier this month, Premier Li Keqiang urged the timely payment of workers' salaries.
Defaulter China Evergrande Group is prioritising payments to migrant workers and suppliers, Bloomberg reported last week, as regulators demand that the developer head off risk of social unrest.
State-owned developers may also be forced to take over some Evergrande projects next year to ensure homes are delivered to buyers, according to Bloomberg Intelligence.
A Bloomberg index of Chinese property shares rose 1.4 per cent in early Thursday (Dec 23) trading, with Evergrande up as much as 7.6 per cent after the company said its risk committee was actively engaging with creditors.
Still, home-buyer sentiment in China may not improve until the second quarter of next year, according to Daiwa Capital Markets Hong Kong.
Not all developers will benefit from looser credit conditions, wrote analysts, who kept their neutral view on Chinese property shares.
About 52 million migrant workers earn their living in the construction sector, according to Nomura calculations.
Most will join an annual ritual of family reunion that centres around the New Year celebrations, making what is often their only trip home each year.
Paying workers before China's most important holiday is a top priority given the premium President Xi Jinping's government puts on social stability.
"Of all types of debt, developers and their construction partners are especially under pressure for repaying deferred wages, because failing to do so could trigger social instability," wrote Nomura economists Ting Lu and Jing Wang in a note dated Tuesday.
