Government curbs on borrowing in China’s property sector have helped set off a spiral of falling home sales, surging corporate bond yields and waning confidence among investors and prospective home buyers. Official data shows new starts by developers fell more than 11% in 2021 and property investment tailed off in the later part of the year. This process, known as a distressed debt exchange, is often considered equivalent to defaulting by rating companies and investors. The Bond Market Is Separating the Weak From the StrongInvestors have dumped bonds from financially weaker developers, like Evergrande, indicating deep skepticism that these debts will be repaid in full. And Property Stocks Have CrashedThe debt-market malaise is grabbing headlines in part because Chinese property makes up such a big part of the Asian junk-bond market and because investors are eager to see how foreign bondholders are treated.

Source: Wall Street Journal January 23, 2022 19:09 UTC