The Chinese real estate group Country Garden has reported record losses of €6.5 billion for the first half of 2023 and has issued a warning that it could default on its debt if its financial performance continues to deteriorate. This news highlights the struggling growth of the Chinese economy, as the property sector is estimated to represent around 30 percent of the country's economy.[0]
Country Garden, once considered a financially secure company, has experienced significant financial woes, posting a loss of 48.9 billion yuan ($6.7 billion) for the first half of the year. The company's cash reserves have also decreased by 21% over the past year.[1] With total liabilities of nearly $200 billion, Country Garden faces mounting pressure to pay off its debts, including approximately $4.3 billion in bonds set to mature by the end of 2024.[2]
The company has already missed interest payments to bondholders and has warned of potential defaults in the future.[3] Country Garden's financial troubles have been attributed to a slowdown in house buying in China's second and third-tier cities. The company's struggles have caused widespread concern among investors and have triggered a sell-off in Chinese property stocks.
Country Garden has attempted to alleviate some of its financial burden by issuing new shares to pay off one creditor.[4] However, it still faces the challenge of paying off missed interest payments on two dollar bonds within a 30-day grace period, which is set to expire soon.[2] Failure to meet this payment could result in a default.
Despite these difficulties, there have been reports that bondholders have agreed to a plan allowing Country Garden to extend payment for a 3.9 billion yuan ($540 million) bond sold to investors in China.[5] This development has provided some temporary relief for the company and has led to a surge in its stock price.
If Country Garden were to default, it could have a significant impact on investor confidence and further damage the already struggling Chinese real estate sector. The company has four times as many property projects as Evergrande, another major Chinese property developer that is currently facing its own financial crisis.
Country Garden's financial troubles raise concerns about the stability of the Chinese property market and its potential impact on the country's overall economic growth. The government has implemented measures to revive demand in the real estate market, including lowering mortgage requirements in major cities such as Shenzhen and Guangzhou.
The future of Country Garden remains uncertain as it grapples with its mounting debt and the potential consequences of default. Investors and industry experts will be closely watching the company's financial performance and any developments in the Chinese property market.
0. “Business Daily – Chinese property firm Country Giant posts record losses, warns of potential default” FRANCE 24 English, 31 Aug. 2023, https://www.france24.com/en/tv-shows/business-daily/20230831-chinese-property-firm-country-giant-posts-record-losses-warns-of-potential-default
1. “China's Top Developer Country Garden Races To Avert An Evergrande-Like Scenario – Country Garden Hldgs Co” Benzinga, 4 Sep. 2023, https://www.benzinga.com/markets/asia/23/09/34213260/chinas-top-developer-country-garden-races-to-avert-an-evergrande-like-scenario
2. “Chinese developer Country Garden boosted after debt repayment deal” Financial Times, 4 Sep. 2023, https://www.ft.com/content/88f4fd3f-75b2-4af5-94ee-b1550826f43d
3. “China's biggest homebuilder is fighting for its life. Here's what you need to know about the real estate crisis” WICZ, 31 Aug. 2023, https://www.wicz.com/story/49574320/chinas-biggest-homebuilder-is-fighting-for-its-life-heres-what-you-need-to-know-about-the-real-estate-crisis
4. “Chinese real estate takes another turn for the worse – Splash247” Splash 247, 31 Aug. 2023, https://splash247.com/chinese-real-estate-takes-another-turn-for-the-worse/
5. “Country Garden survives one debt deadline. The next is just days away” erienewsnow.com, 4 Sep. 2023, https://www.erienewsnow.com/story/49583280/country-garden-survives-one-debt-deadline-the-next-is-just-days-away
