Exploring The Causes Of Debt Defaults Of Real Estate Companies Based On The Perspective Of The "three Red Lines

The real estate industry is the " The Gray Rhino" with the greatest financial risk in China at this stage.Its potential capital and debt risks seriously affect China’s financial security and social stability.Since 2020,debt defaults of real estate enterprises have occurred frequently.At the same time,The People’s Bank Of China and the Minstry of Housing and Urban-Rural Development of the People’s of China issued the "Three Red Lines" for financing restrictions of real estate enterprises in 2020.This paper will explore the internal causes of debt default of real estate enterprises from the perspective of " Three Red Lines",so as to make an early warning for the financial risk of real estate enterprises.This paper selects China Fortune Land Development(CFLD),which has incurred debt default of more than 100 billion yuan so far,as the case study object.Firstly,this paper evaluates the financial risk of CFLD through the traditional financial risk early warning model Z-score Model and F-score model.The results show that the application effect of the traditional financial risk early warning model for real estate enterprises is poor,and it can not effectively identify the financial risk and the reasons that may lead to the debt default of CFLD.This paper then analyzes the operation and financing of CFLD from the perspective of "Three Red Lines" indicators,as well as the industry development and the strategy of CFLD from a macro perspective,and draws a series of valuable conclusions on the causes of its debt default.From the perspective of asset liability ratio after excluding advance receipts,it reflects the situation that its capital structure is unreasonable and the growth of operating revenue masks the obstruction of sales performance;From the perspective of net debt ratio,it reflects its heavy burden of interest bearing liabilities,high financing cost,insufficient equity financing,public shares,real debt and off balance sheet debt;From the perspective of cash short debt ratio,it reflects that cash is difficult to cover shortterm debt,the debt maturity structure is unbalanced,and the cash flow from operating activities is unhealthy;From the perspective of the company’s strategy,it reflects the situation that its investment layout is too concentrated,the radical expansion strategy is adopted,the business bottleneck of industrial development,and the dividend payment rate is high.Finally,this paper puts forward specific operable suggestions for real estate enterprises to resolve debt risks from the two perspectives of "Three Red Lines"indicators and management transformation of the real estate industry.Through the research of this paper,a financial risk analysis framework of real estate enterprises based on the "Three Red Lines" index analysis is formed,which can find the causes of debt default of real estate enterprises from the disassembly of the "Three Red Lines" index,and clearly see how to prevent the financial risk of real estate enterprises from the perspective of the "Three Red Lines" index,avoid debt default,and provide suggestions and ideas for the optimal development of real estate enterprises.