Country Garden: China property giant default fears grow

Aerial view of a housing project built by China's property giant Country Garden.

authored by Mariko Oi

journalist for company

Country Garden, the largest private estate developer in China, is thought to be the most recent real estate juggernaut to default on its international loan.

A default would be one of the largest corporate debt restructurings in the nation, with the company owing$ 11 billion(£ 9 billion ) in debt and another$ 6 billion in onshore loans.

Its potential definition raises questions about China’s ability to recover from the pandemic.

China’s real estate market, which makes up a fourth of the business, is experiencing significant problems.

According to the most recent statistics, the nation’s economy expanded 4.9 % in the three months between July and September. Compared to the 6.3 % growth in the second quarter, that is slower.

Despite Beijing’s efforts to increase cover need, the number of home sales is also lower than it was last year.

According to the most recent data, the nation’s real estate investment decreased by 9.1 % during the first nine months of the year.

The crisis-stricken Country Garden reported a record$ 6.7 billion($ 5.2 billion ) loss for the first six months of the year in August. Given the size of the debt, if its definition is confirmed, Country Garden’s offshore lenders will begin talks with the company ‘ financial counselors to launch a restructuring process that may take several months.

According to Raymond Cheng, Standard Chartered’s North Asia main purchase officer,” This will spark our worries about the housing market in China.”

In order to regain confidence and trust in the market, markets will probably seek a more coordinated policy approach, Mr. Cheng continued.

The current real estate market turmoil in China began when Country Garden’s competition Evergrande was declared to be in proxy in 2021. Police are currently keeping an eye on Evergrande’s president.

When new regulations to regulate the amount of money that large real estate firms may acquire were implemented in 2020, China’s housing market was rocked.

Evergrande, which was once China’s top-selling developer, amassed debts totaling more than$ 300 billion as it aggressively grew to become one of the largest corporations in the nation.

With a number of other developers defaulting on their debts and abandoning empty construction projects across the nation, the government’s property industry has been affected by its economic issues.

China is also dealing with different issues, such as slow economic growth, rising regional government debts, and record-high youth unemployment.