HSBC Holdings (NYSE:HSBC) has raised concerns over the potential for further downturns in China's property sector, leading to an increase in provisions for losses. In response to these uncertainties, the bank has earmarked approximately $500 million of its $1.1 billion expected credit loss charges for Q3 2023 specifically for the mainland China commercial real estate sector.
This allocation brings HSBC's total charges against its China property portfolio to $800 million this year. The bank highlighted risks associated with uncertainties surrounding liquidity support for state-owned enterprises and continued weakness in market fundamentals, which could result in performance uncertainty and offshore refinancing risk.
In an effort to mitigate these risks, HSBC has reduced its exposure to mainland China's commercial real estate sector to $13.6 billion, a decrease of approximately $600 million from Q2 2023. This reduction is primarily attributed to write-offs in Q2.
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