2023-08-20 06:07:00
Country Garden is in deep trouble following announcing last week that it was unable to repay two loan installments. The first private real estate developer in China estimated its debt at the end of 2022 at some 150 billion euros. But for the Bloomberg agency, it might reach 176 billion euros.
Four times more projects than its competitor Evergrande
As China’s largest private developer by sales last year, Country Garden is a staple in smaller cities, which account for regarding 60 percent of its projects. These are precisely the areas where property prices have fallen the most and where customers have limited purchasing power.
At the end of 2022, Country Garden had more than 3,000 construction sites in progress, including around thirty abroad, mainly in Australia, Indonesia and the United States. The stoppage of building sites causes social instability in China, because the owners often pay before the goods are built.
With four times as many projects as its competitor Evergrande, whose work stoppage led to protests and payment strikes last year, Country Garden’s debt was estimated at the end of 2022 at around 1.152 billion yuan (150 billion). euros).
According to Bloomberg, this debt would be even higher, reaching around 1.4 trillion yuan (176 billion euros). Although it had a cash position of 147.5 billion yuan ($18.5 billion today) at that time, Country Garden was unable to meet two loan interest payments last week. In addition, additional deadlines are expected in September.
The fragility of the real estate sector in China impacts the entire economy
The pressure is increasing with 31 billion yuan (3.9 billion euros) of bonds that will mature in 2024, according to the rating agency Moody’s. This situation adds to the fragility of the real estate sector in China, already damaged by the health crisis and the economic slowdown.
The mistrust of potential buyers worsens the financial situation of promoters, including public groups. The setbacks of the real estate giants, Country Garden and Evergrande, reinforce this fragility.
House prices fell in July at their fastest pace in a year, according to official figures. The crisis is even affecting financial conglomerates such as Zhongzhi, which manages more than 1 trillion yuan (125.6 billion euros) in assets and is facing difficulties reimbursing beneficiaries. A default by Zhongzhi might expose hidden risks in the Chinese financial system… and its collapse!
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