2023-08-16 07:54:04
On Monday, the stock market action of one of China’s real estate giants, Country Garden, fell by more than 18%. The company carries heavy debts which amount to between 150 and 176 thousand dollars. This financial collapse is partly due to a pharaonic project launched by the company in 2016.
It was named “Forest City” and alone represents a budget of 100 billion dollars. It aims to build the “smart and green city” in southern Malaysia. At the time, the ambitions were great. The city was to accommodate 700,000 inhabitants on four artificial islands spread over 30 km2. Seven years later, this project is definitely a failure. Only a few thousand people live there and only 28,000 homes have been completed on the only one of the four finalized islands. Nearly 90% of businesses are also abandoned, according to the Malaysian daily New Straits Times . It is therefore a bitter failure for the company which jeopardizes its economic future. It is even described as a “ghost town” by observers and the media who have visited the site.
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Too high a price
One of the reasons for this failure is the price of housing, which is far too high for potential future residents. The apartments would be sold there around 2,800 euros per m2 according to France 2. A substantial price, especially since the salary of an average Malaysian does not exceed 700 euros. Some more luxurious apartments can even exceed a million dollars.
The project also did not appeal to wealthy Chinese investors who should have represented potential customers. They curbed their investments following the contrary opinion of the Malaysian authorities. In 2018, the country’s Prime Minister announced that he would not allow foreigners to buy in “Forest City”, only to change his mind soon following. Added to this instability is the capital controls imposed by Chinese President Xi Jinping.
Goal 2035
Despite these great difficulties and criticism, the Country Garden company is still trying to defend its project. They inaugurated two golf courses, two luxury hotels, an international school, a factory and even a water park. The newspaper New Straits Times, the Chinese developer said it was too early and unfair to call the project a “failure”. Also according to the company, the project will be completed by 2035. However, Country Garden announced in early August that it might reassess its development plans within two years if this becomes necessary. “Unforeseen factors such as the COVID pandemic and the slowdown in the global economy have impacted the development momentum,” he acknowledged. They add that more than 100 foreign real estate agents have already been hired to market Forest City to potential buyers.
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