China's property woes continue to mount with another developer posting steep losses

Mass defaults and abandoned projects have become a headwind for China's struggling economy, with the property sector leading the slump.

• The Chinese property sector can't seem to catch a break at the moment. 
• Shimao Group stocks took a beating Monday after the developer reported crushing losses.
• The property sector makes up around one-fifth of China's GDP and its decline has been a drag on the economy. 

China's property-sector woes continue to mount with Shimao Group, one of the country's many developers that have defaulted on their debt, announcing crushing losses. 

A protracted real-estate downturn in the world's No. 2 economy has seen property firms grapple with heavy debt burdens and sluggish demand for new property, with potential homebuyers prioritizing savings in a slowing economy. 

Now Shimao Group has released its financial results after a 16-month delay and various threats to delist the company. It posted a 48.6 billion yuan loss ($6.8 billion) over two years of trading, and today – after trading in its stock resumed for the first time since April 2022 – shares in the troubled firm fell by 67%. 

Shimao's stock price decline is its biggest on record and is symptomatic of a wider crisis facing the sector. Last month, Evergrande, China's largest developer, announced a whopping $81 billion two-year loss – a figure almost triple the GDP of Iceland. The firm hit the headlines back in 2021 when it defaulted on its debt pile – an event that reverberated through global markets and had wide-ranging consequences on the Asian nation's property sector. 

Mass defaults and abandoned projects have become a headwind for China's struggling economy, with the property sector leading the slump. 

Property sales by floor area fell 28.1% in June from a year ago, marking the largest drop of the year and even worse than May's 19.7% decline, according to a recent report by Reuters. A fall in house prices, a drop in construction starts, and a fall in real-estate investments have all heaped misery on the homebuilding industry. 

The property sector makes up around one-fifth of China's GDP and its decline has dragged down second-quarter growth for the country, which rose 6.3% from a year ago. This was well below the 7.1% forecast among economists. 

The Asian country has struggled with a weak post-pandemic rebound, and pressure has mounted on Beijing to introduce measures addressing the slump.