2023-08-30 16:46:00
Country Garden, one of China’s largest property developers, announced 48.9 billion yuan losses in the first half, or 6.1 billion euros, this Wednesday, August 30. This performance is in line with the estimate range made by the group in early August (between 45 and 55 billion yuan). A year ago over the same period, Country Garden had generated a slight profit of 612 million yuan (77 million current euros).
This announcement comes as the group postponed last week the deadline to August 31 for the vote of its creditors on a rescheduling of its repayments. This election is decisive, since it would allow it to avoid a default with catastrophic consequences for the second largest economy in the world.
An abyssal debt
As a reminder, the developer, long deemed financially sound, was unable at the beginning of the month to repay two interests on loans, at a time when the real estate sector is experiencing an unprecedented crisis in China. Country Garden formally risks a payment default if it does not settle these sums, following a grace period of 30 days which expires at the beginning of September.
To add to the difficulties, he must also pay a bond for a total amount of 3.9 billion yuan (regarding 500 million euros), which matures in ten days. Country Garden’s situation has been shaking the markets for many months already. And for good reason, the group had a considerable debt at the end of 2022, which it then estimated at some 1.152 billion yuan (150 billion euros). Bloomberg figures it for its part at around 1.4 trillion yuan (176 billion euros).
Thousands of construction sites
Country Garden was the biggest promoter in China last year. It has four times more projects than Evergrande, whose shutdown of construction sites led to protests and monthly payment strikes last year. Country Garden employs tens of thousands of people and is listed in the Forbes list of the 500 largest companies in the world. Her boss, Yang Huiyan, was until recently the richest woman in Asia.
The group is essential in small towns, which represent approximately 60% of its projects. Problem, these are where property prices have fallen the most and where most of its customers have very limited purchasing power. At the end of 2022, Country Garden listed more than 3,000 construction sites in progress, including around thirty abroad, mainly in Australia, Indonesia and the United States.
Evergrande also accumulates difficulties
Last Sunday, the highly indebted Chinese promoter Evergrande announced that it had reduced its losses in the first half, despite a worrying lack of liquidity. Its net losses for the January-June period amounted to 33 billion yuan ($4.53 billion), according to a statement. They were 66.4 billion yuan for the same period last year.
The group, however, saw its cash melt during the first half of 2023, since it fell from around two billion dollars to only 556 million – a small sum for a group of this size. A situation that should complicate its repayments in the coming months.
The group’s abysmal indebtedness has been worrying the markets for two years and regularly makes headlines in the Chinese and international press. Evergrande now estimates its total debt at 2,388.2 billion yuan ($328 billion), up from nearly $340 billion at the end of 2022.
The setbacks of the two real estate giants are further weakening a sector already scalded by the health crisis and the economic slowdown in China. To revive this key sector of the economy, China announced further easing measures for mortgage lending.
(With AFP)
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