Beijing’s new tightening policies limiting property developers’ financing channels are causing collateral damage—developers are saving cash by reducing payments to their contractors and suppliers. Rising payables have improved developers’ liquidity conditions, but have increased the risks of defaults and unpaid wages for contractors. Salaries for hundreds of thousands of migrant workers in the construction industry must be paid by year-end, when those workers return home. As a result, developers will need to come up with more cash, increasing financial pressure within the property industry for the next few months and likely reducing property prices and slowing construction and land sales.
