Prolonged stress in China's real estate market would negatively affect different sectors to different degrees. China has not necessarily entered such a stress scenario yet. Fitch said the recent mortgage strike could diminish confidence in the property market, delaying a recovery and causing ripple effects through the domestic economy.

Fitch: China's real estate troubles could spill into other major sectors if problems persist. Three particular businesses are most vulnerable, according to ratings agency Fitch. Since last year, investors have worried that Chinese property developers' financial problems could spread to the rest of the economy.

Many homebuyers' refusal to pay their mortgages have brought developers' problems to the forefront again. Fitch analyzed the impact over the next 12 to 24 months on more than 30 kinds of businesses and government entities. The firm found three that are most vulnerable to real estate's troubles.

Asset management companies "hold a sizeable amount of assets that are backed by real estate-related collateral," the report said. Engineering, construction firms (non state-owned) have been in difficulty since 2021, it said. They do not have competitive advantages in infrastructure project exposure or funding access relative to their peers.

Construction accounts for 55% of steel demand in China. Smaller steel producers could face liquidity issues if China's economy remains lacklustre. Official data show residential housing sales fell by 32% in the first half of this year from a year ago. The slowdown in real estate has already dragged down broader economic indicators.
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