2023-08-14 05:58:10
The Chinese company’s share price fell by more than 16 percent at 11:00 (03:00 GMT) on the Hong Kong Stock Exchange.
The private real estate giant was included in the “Forbes” list of the 500 largest companies in the world. Its chief, Yang Huiyan, was until recently one of the richest women in Asia.
“We are facing difficulties that are the biggest since our founding,” Yang said in a statement Friday, adding, “We firmly believe that the real estate sector will eventually return to the path of healthy and steady development following going through this stage of profound changes.”
The company has long been considered financially strong but last Monday it failed to make two bond payments and following a 30-day grace period, the company faces default in September if it remains unable to pay.
And “Country Garden” announced at the end of the week that it would suspend trading of its internal bonds, starting from Monday, in a decision that is likely to cause concern in the markets, while the company reports that the value of its debt amounted to regarding 1.15 trillion yuan ($ 159 billion) in late 2022.
Its additional commitments raised a further estimate of its total debt to regarding 1.4 trillion yuan ($193 billion), according to Bloomberg.
A collapse of Country Garden would have disastrous repercussions for China’s financial system and economy, as it would for its heavily indebted rival Evergrande.
The group announced earlier this month that it expects its losses in the first half of the year to be between 45 billion and 55 billion yuan (regarding 6.2 billion to 7.65 billion dollars).
“Due to the recent deterioration in sales and the refinancing environment, the funds available in the company’s coffers are continuously declining, leading to liquidity pressure in stages,” the company confirmed in an announcement published by the Hong Kong Stock Exchange.
Reforms in the Chinese housing sector in the late 1990s led to a boom in the real estate sector, which was contributed to by social traditions that consider owning a property a condition for marriage.
However, in recent years, Beijing has come to consider the huge debt accumulated by major companies in the sector as an unacceptable source of danger to the country’s financial system and its overall economic health.
In an effort to reduce the sector’s indebtedness, the authorities have gradually tightened, since 2020, the conditions for developers to obtain loans, which led to drying up the financing sources of mainly indebted companies.
This was followed by several companies, especially Evergrande, announcing their default, which undermined the confidence of potential investors and affected the sector.
The collapse of the once thriving sector comes on top of a general economic slowdown in China.
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