2023-08-13 06:28:00
Real estate in China
China’s economy
Its debt exceeds $194 billion
Dubai – Al Arabiya.net
Posted on: August 13, 2023: 10:28 AM GST Last updated: August 13, 2023: 11:33 AM GST
Volatility increased for one of China’s largest real estate developers, with less than 30 days left to avoid default on its bonds, the latest sign of the government’s struggle to end the country’s real estate slump as the economy slows.
Country Garden Holdings, which had total liabilities of 1.4 trillion yuan ($194 billion) at the end of last year, said it underestimated the market downturn and faced the biggest challenge since its founding in 1992. The real estate company expects a net loss of 55 billion yuan. For the first half of 2023, compared to profits of regarding 1.91 billion yuan a year earlier, according to Bloomberg, which was reviewed by Al Arabiya.net.
China is losing the largest engine of economic growth.. Dreams of wealth are evaporating!
Its subsidiary, Country Garden Real Estate Group, said it would suspend trading in approximately 12 of its domestic bonds from Monday, two days following the controlling shareholder in the Chinese real estate firm reported a multibillion-dollar loss in the first half of this year.
It comes as a developer’s liquidity crunch adds to concerns regarding the potential drag the industry will have on growth in the world’s second-largest economy, sending the country’s Bloomberg Junk Dollar Index to its lowest level since last year on Thursday.
For his part, said portfolio manager at “UOB Asset Management”, Wei Liam Goh: “The Country Garden statement confirmed between its lines the worst fears of investors regarding the dire state of the faltering Chinese real estate market.”
Regulators across the Chinese government have been seeking since late last year to revive demand in the real estate sector, which accounts for regarding a fifth of China’s gross domestic product. Measures such as easing mortgage rates on first home purchases have so far failed to stem the crisis, as home sales fell the most in July.
The downturn has left the real estate sector stuck in a vicious cycle, following a previous government campaign aimed at getting developers to deleverage led to a decline in home purchases. This slashed the builders’ cash flow, resulting in a record amount of defaults.
Unprecedented protests erupted across cities last year as builders ran out of money to complete and hand over apartments to buyers, prompting policymakers to step in. The Communist Party pledged further easing of property procedures following its Politburo meeting in late July.
“Although there have been positive policy signals” since then, “the real estate sector requires timely and tangible political support to stabilize,” said Andy Swain, co-head of fixed income at PineBridge Investments. “Continued defaults among developers might erode homebuyer confidence.”
The latest crisis came following holders of two dollar bonds issued by Country Garden, led by one of China’s richest women Yang Huiyan, failed to receive coupon payments due on August 7, according to the bondholders, who asked not to be identified.
The renewed turmoil comes as economic demand shows signs of weakening and hopes for a quick recovery following the easing of pandemic measures fade.
The latest data showed lower consumer and producer prices in July than last year. The census bureau said the downturn was likely to be temporary and consumer demand was improving.
Finally, Tommy Wu, chief China economist at Commerzbank AG, said: “The economic recovery from the country’s post-Covid reopening mainly refers to the recovery of consumption, which makes it even more important to save the real estate sector at the current stage.” “The failure of another major Chinese developer would put enormous pressure on an already slowing economy.”
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