{"id":11840,"date":"2021-10-14T17:00:00","date_gmt":"2021-10-14T09:00:00","guid":{"rendered":"https:\/\/www.tejwin.com\/?post_type=news&#038;p=11840"},"modified":"2026-03-03T11:45:02","modified_gmt":"2026-03-03T03:45:02","slug":"credit-crisis-of-chinas-real-estate-enterprises-ccrqm-validity-verification-and-early-warning","status":"publish","type":"news","link":"https:\/\/www.tejwin.com\/en\/news\/credit-crisis-of-chinas-real-estate-enterprises-ccrqm-validity-verification-and-early-warning\/","title":{"rendered":"Credit Crisis of China&#8217;s Real Estate Enterprises-CCRQM Validity Verification and Early Warning"},"content":{"rendered":"\n<figure class=\"wp-block-image size-full is-resized\"><img fetchpriority=\"high\" decoding=\"async\" width=\"530\" height=\"330\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u4fe1\u7528\u5371\u6a5f\uff1a\u4e2d\u570b\u623f\u4f01\u66b4\u96f7.png\" alt=\"\u4fe1\u7528\u5371\u6a5f\uff1a\u4e2d\u570b\u623f\u5730\u7522\u4f01\u696d\uff0c\u6301\u7e8c\u66b4\u96f7\u4e2d\" class=\"wp-image-8601\" style=\"width:685px;height:427px\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u4fe1\u7528\u5371\u6a5f\uff1a\u4e2d\u570b\u623f\u4f01\u66b4\u96f7.png 530w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u4fe1\u7528\u5371\u6a5f\uff1a\u4e2d\u570b\u623f\u4f01\u66b4\u96f7-300x187.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u4fe1\u7528\u5371\u6a5f\uff1a\u4e2d\u570b\u623f\u4f01\u66b4\u96f7-150x93.png 150w\" sizes=\"(max-width: 530px) 100vw, 530px\" \/><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69f15789906b8\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69f15789906b8\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tejwin.com\/en\/news\/credit-crisis-of-chinas-real-estate-enterprises-ccrqm-validity-verification-and-early-warning\/#Preface\" >Preface<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tejwin.com\/en\/news\/credit-crisis-of-chinas-real-estate-enterprises-ccrqm-validity-verification-and-early-warning\/#Defaulting_company\" >Defaulting company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tejwin.com\/en\/news\/credit-crisis-of-chinas-real-estate-enterprises-ccrqm-validity-verification-and-early-warning\/#The_effectiveness_of_CCRQM_credit_risk_indicators\" >The effectiveness of CCRQM credit risk indicators<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Preface\"><\/span>Preface<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In the previous article, we introduced the China Evergrande&#8217;s bond default case. This case started a series of explosions in China&#8217;s real estate company\u2019s debt default. According to statistics, in the first three quarters of 2021, the cumulative number of defaulted bonds of Chinese real estate companies reached 39, an increase of 25 over the same period in 2020, and the cumulative defaulted amount reached 46.75 billion, an increase of 159% over 2020.<\/p>\n\n\n\n<p>In addition to expansion and financial operations, the reasons for the default of real estate companies can also be discussed from the perspective of minority interest (the equity held by the joint venture party): In order to reduce their own development costs and the initial capital pressure, Chinese real estate companies will often look for other shareholders to establish joint venture project companies and cooperate to obtain land. When the development is over, the real estate companies will repurchase their equity from the joint venture shareholders. If the joint venture shareholders do not want to bear the sales risk of the subsequent construction project, they usually require the real estate company to repurchase the equity before the construction project is sold.<\/p>\n\n\n\n<p>Although cooperative development allows Chinese real estate companies to save early development costs, they still need to repurchase the equity as agreed, which is equivalent to delaying payment for the saved costs. After all, there is no cost saving effect, and this action also increases a lot of financial burdens. When the money that Chinese real estate companies receive from joint venture shareholders is not enough to cover the repurchase funds, the flow of funds may have problems.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Defaulting_company\"><\/span>Defaulting company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As of October 2021, 5 Hong Kong listed real estate companies have defaulted. Except for Fantasia Holdings Group, the remaining 4 companies have violated 2 or 3 red lines. In terms of minority interest proportion , with the exception of Sunshine 100 China Holdings, the remaining minority interest proportion accounts for more than 40% of the net value. Table 1 shows that the defaulting company has either violated three red lines or has a high minority interest ratio.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"295\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/image-166-1024x295.png\" alt=\"defaulting Hong Kong real estate companies\" class=\"wp-image-11842\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-166-1024x295.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-166-300x87.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-166-150x43.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-166-768x222.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-166-1536x443.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-166-2048x591.png 2048w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\"><strong>Table 1. Statistics on the three red lines of defaulting Hong Kong real estate companies and the minority interest as a percentage of net value in 2021<\/strong><\/figcaption><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p>\u200b\u200b\u200b\u200b\u200bTable 2 summarizes the list of companies that have volated two or three red lines in the 2021 semi-annual report and have a minority interest ratio of more than 40% of their net value. According to the search criteria, a total of 29 companies were found, of which 10 companies have defaulted. Central China Real Estate and R&amp;F Properties have respectively sought assistance from the Henan government and the controlling shareholder Country Garden Holdings. Another 17 companies have potential default risks, many companies&#8217; bond yields have increased sharply, or bond prices have plummeted.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"731\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/image-167-1024x731.png\" alt=\"The list of companies that have violated two or three red lines in the 2021 semi-annual report and have a minority interest ratio of more than 40% of their net worth\" class=\"wp-image-11854\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-167-1024x731.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-167-300x214.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-167-150x107.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-167-768x548.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-167-1536x1096.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-167-2048x1462.png 2048w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\"><strong>Table 2. The list of companies that have violated two or three red lines in the 2021 semi-annual report and have a minority interest ratio of more than 40% of their net worth<\/strong><\/figcaption><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p>In the short term, the Chinese government will still use three red lines to monitor the risks of real estate companies. Therefore, we try to identify companies with potential crises in the future by evaluating the three red lines and the proportion of minority interest information. This reminds readers to pay attention to the future debt repayment status of these companies.<\/p>\n\n\n\n<p>How can this series of conditions be warned before 2020 or even earlier? TEJ&#8217;s CCRQM provides a differentiated credit risk quantitative model, reasonably assesses the credit risk of Chinese enterprises, and assists in managing the overall credit default risk of lending or investment!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_effectiveness_of_CCRQM_credit_risk_indicators\"><\/span>The effectiveness of CCRQM credit risk indicators<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>CCRQM have been modeled since 2009. This pure quantitative model of credit risk indicators has undergone more than 10 years of market testing, and the average credit rating ROC (Receiver Operating Characteristic) indicator is close to 90%. Especially in this wave of landmine lists of Chinese real estate companies, most companies were included in the high-risk list at least a year ago to warn the market in advance.<\/p>\n\n\n\n<p>Looking back since 2020, in the face of severe epidemics, rising debt risks, and the continued impact of the China\u2013United States trade war, the high-risk grades in CCRQM accounted for the proportion of companies rated in the current year, down from 35.27% to 32.70% in the previous year, but still remained at a high-end, reflecting the high credit risk of China&#8217;s overall enterprises.<\/p>\n\n\n\n<p>In 2020, there are 32 listed companies in China that have a crisis as defined by CCRQM. Compared with 37 companies in the previous year, the number of crisis cases has dropped by 5. Among them, there is a crisis company Guangdong Mingzhu (600382) failed to be classified as a high-risk level in a year before the crisis. Compared with the two mistakes made in the previous year, the ROC (Receiver Operating Characteristic) indicator rose slightly to 93.36%, which is highly recognized.<\/p>\n\n\n\n<p>After the completion of the CCRQM model in 2008, ROC was only 85.38% affected by the financial tsunami in 2009, and only 88.76% affected by false financial reports and controlling shareholders in 2014. The rest of the year is higher than that during the modeling period. (2005-2008).<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"184\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/image-168-1024x184.png\" alt=\"CCRQM basic level verification\u2500ROC\" class=\"wp-image-11856\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-168-1024x184.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-168-300x54.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-168-150x27.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-168-768x138.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-168-1536x276.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-168.png 1834w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\"><strong>Table 3. CCRQM basic level verification\u2500ROC<\/strong><\/figcaption><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p>For users, they can examine the status of credit rating adjustments through the Transition Matrix. As shown in Table 4, the average one-year maintenance rate from 2005 to 2020 is about 40% to 60%, which is similar to the general statistical model of Taiwan listed companies. It shows that the basic level still has a considerable degree of stability. Among them, the volatility of low-level credit risk is smaller than that of high- level credit risk.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"392\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/image-169-1024x392.png\" alt=\"CCRQM average 1-year transition matrix from 2005 to 2020\" class=\"wp-image-11858\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-169-1024x392.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-169-300x115.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-169-150x57.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-169-768x294.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-169-1536x589.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-169.png 1785w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\"><strong>Table 4. CCRQM average 1-year transition matrix from 2005 to 2020<\/strong><\/figcaption><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p>The common language of the credit rating market is the rating of large international credit rating agencies. CCRQM is compared with international large-scale credit rating agencies S&amp;P and Moody&#8217;s, and requires the use of the 10-period average 3-year cumulative crisis probability and the benchmark external credit rating agency&#8217;s long-term average 3-year cumulative crisis probability as a reference CDR to control.<\/p>\n\n\n\n<p>According to the CCRQM data from 2005 to 2020, there has been an average 3-year cumulative crisis probability of more than 10 periods, and the comparison results have certain reference value.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"392\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/image-170-1024x392.png\" alt=\"Mapping\u00a0of CCRQM with S&amp;P and Moody's level\" class=\"wp-image-11860\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-170-1024x392.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-170-300x115.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-170-150x57.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-170-768x294.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-170-1536x589.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-170.png 1785w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\"><strong>Table 5. Mapping&nbsp;of CCRQM with S&amp;P and Moody&#8217;s level<\/strong><\/figcaption><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p>Overall, the validity verification of the CCRQM in 2020 has completed the test of the rating results, and the ROC is as high as 93.36%, which is a usable model. Crisis companies were classified as high-risk by CCRQM one year before the accident, which has early warning capabilities. In terms of stability, the grade maintenance rate is about 40-60%, which is similar to the general statistical model of Taiwan listed companies about 4-50%, showing that the CCRQM has a certain degree of stability.<\/p>\n\n\n\n<p>TEJ provides CCRQM on the issue of Chinese corporate credit risk, daily Shanghai and Shenzhen market news, to help users face the tremendous Chinese market, effectively distinguish the degree of risk and track the latest information of the company. Unlisted Chinese companies can also be inquired through the CCRQM online rating system. By entering corporate capital data and financial report information, you can immediately require credit risk analysis results. It is the best tool for investment or credit evaluation!<\/p>\n\n\n\n<p class=\"has-text-color\" style=\"color:#1c66a3\"><strong>For more complete solution to China&#8217;s corporate credit risk, please refer to&nbsp;TEJ CCRQM.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Preface In the previous article, we introduced the China Evergrande&#8217;s bond default case. This case started a series of explosions in China&#8217;s real estate company\u2019s debt default. According to statistics, in the first three quarters of 2021, the cumulative number of defaulted bonds of Chinese real estate companies reached 39, an increase of 25 over [&hellip;]<\/p>\n","protected":false},"featured_media":8601,"parent":0,"menu_order":0,"template":"","tags":[2916,2946,3169],"news-category":[688],"class_list":["post-11840","news","type-news","status-publish","has-post-thumbnail","hentry","tag-credit-risk","tag-industry-analysis","tag-tej-2","news-category-product-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/news\/11840","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/news"}],"about":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/types\/news"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media\/8601"}],"wp:attachment":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media?parent=11840"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/tags?post=11840"},{"taxonomy":"news-category","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/news-category?post=11840"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}