2023-09-03 10:05:02
Country Garden’s financial crisis hits Malaysia’s development project Forest City’s prospects are more pessimistic
(Agence France-Presse, Forest City, Malaysia, 3rd) China’s largest private housing company, Country Garden, has debts of US$196 billion, and its financial situation is in jeopardy. The project “Forest City”, which invested 100 billion US dollars to develop in Malaysia, has not sold well, and it is like a ghost town. The outlook may be even more pessimistic now.
The Forest City development project is located on the outlying island of Johore, Malaysia. It is planned to build an artificial city in the palm grove for US$100 billion (regarding NT$3.1899 billion), and build tens of thousands of residences. The target is locked Chinese middle-class buyers.
However, this development project has experienced problems such as dismal sales, China’s currency control, epidemic prevention and closure of the city, and China’s expansion of influence in Malaysia, which has caused public outrage. Now many residential residents can’t talk regarding it, and some people describe it as a “ghost town”.
Country Garden is currently burdened with US$196 billion (approximately NT$6.2523 billion) in debt. In the first half of this year, it broke a record net loss of RMB 48.9 billion (approximately NT$213.9 billion). If the financial performance continues to deteriorate, there will be a risk of debt default. Doubts arose once more regarding the future of this development project in Malaysia.
A 29-year-old resident surnamed Zhao from Henan Province in China bought an apartment in “Forest City” for US$430,000 (regarding NT$13.71 million) five years ago. He told reporters: “I hope Country Garden can overcome the financial difficulties. If there is no People come to ‘Forest City’, we can’t do business here.”
“Forest City” faces Singapore across the sea. It is one of the many development projects that Country Garden has gambled on. These investment projects once made Country Garden’s reputation soar, but now it is afraid that it will fall back to reality.
The development, under China’s “One Belt, One Road” initiative, in partnership with a Malaysian sultan’s company, aims to attract 700,000 residents, but today only regarding 9,000 people live there. During the day, construction workers can still be seen coming and going, but following nightfall, there are almost no people on the road, and only a few houses are lit. Most buyers don’t live here, the guard said.
Previously, the Malaysian government had opposed granting residence permits to foreign investors, criticizing this development project as a town only for foreigners. However, because “Forest City” may become a “mosquito construction project”, the current Prime Minister Anwar (Anwar Ibrahim) stepped in to save it. He announced last week the creation of “financial zones” and incentives such as special income tax rates and multiple-entry visas.
Nevertheless, observers believe that “Forest City” still faces many difficulties. Bernard Aw, chief Asia-Pacific economist at credit insurer Coface, said Country Garden was facing “liquidity pressure, which might affect their ability to complete overseas development projects”.
“Forest City” is regarding a 3-hour drive from Kuala Lumpur, the capital of Malaysia, and it attracts tourists who want to see modern architecture and buy duty-free alcohol. Denish Raj Ravindaran, a 32-year-old tourist from Singapore, said: “Everyone comes here to buy alcohol. I wouldn’t stay here, it’s like a ghost town, there are no street lights on the road, it’s dark and dangerous .”
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