Published on : 30/07/2022 – 11:04Modified : 30/07/2022 – 11:08
Yang Huiyan, majority shareholder of Country Garden, one of China’s largest real estate groups, has seen his wealth halve in just one year. A reversal of fortune which illustrates the difficulties of a Chinese market now closely watched by the Beijing authorities. Explanations.
She is still the richest woman in Asia but with a fortune cut in half. In just one year, Yang Huiyan’s wealth has grown from $23.7 billion to $11.3 billion, according to the Bloomberg ranking of billionaires published this week. A vertiginous fall which once once more illustrates the fragility of the Chinese real estate market.
A discreet heiress, Yang Huiyan is the majority shareholder of Country Garden, a company created by her father in the early 1990s, which has become one of the most important promoters in China.
The company achieved the highest turnover in the sector last year despite a real estate crisis symbolized by the group Evergrandethe former number 1, weighed down by an abyssal slate of 300 billion dollars.
Far from being so badly off, Country Garden is however very indebted, like most Chinese real estate giants. However, since 2020, Beijing has whistled the end of recess: the conditions of access to bank credit for promoters have become much more restrictive. Objective: to avoid a collapse of the sector, potentially cataclysmic for the entire Chinese economy.
Victim of market jitters
To honor its payment deadlines and launch new investments, Country Garden has therefore chosen to put on sale, Wednesday, July 27, new shares to increase its liquidity.
“However, this sale of shares was interpreted as a sign of vulnerability in a sector in great difficulty which represents a significant weight in Chinese GDP. The financial markets are therefore very nervous”, analyzes the economist Mary-Françoise Renard, author of “China in the global economy” (ed. Blaise Pascal University Press).
As a result, Country Garden shares lost 15% of their value on the Hong Kong Stock Exchange, effectively dealing a serious blow to Yang Huiyan’s portfolio.
“The tightening of credit access conditions was necessary, but in the short and medium term it increases the difficulties of these companies, which are finding it increasingly difficult to finance themselves,” explains Mary-Françoise Renard. “A few years ago, Country Garden might have borrowed from banks without any problem.”
Cascading payment defaults
If Country Garden was able to raise funds at the cost of a fall in the value of its share, other major players are far from having such solid backs and find themselves, like Evergrande, in the inability to repay a maturing loan.
At the beginning of July, the Shimao group, which recorded a 72% drop in sales over one year in the first five months of the year, had to give up repayment of a loan worth more than one billion dollars. dollars. In May, the Sunac group found itself short of cash and announced a payment default.
For two decades, the real estate sector has benefited from the continuous rise in the standard of living of the population in a country where the purchase of a property is often a prerequisite for marriage. But this bulimia of purchases ended up drying up in the 2010s.
The uncertainties linked to the Covid-19 crisis also contributed to dampening the enthusiasm of potential buyers. Beijing’s “zero Covid” strategy “weighs on household consumption. In general, it is very costly for the whole economy”, notes Mary-Françoise Renard.
Refund Strike
Added to these difficulties is the beginning of a crisis of confidence: several hundred groups of Chinese owners who have bought apartments off plan have decided not to repay their mortgages. A way to put pressure on developers when the construction of a property is interrupted.
Despite the authorities taking control of the sector, the structural problems persist and are not regarding to disappear, believes Mary-Françoise Renard, who cites “the massive indebtedness of promoters, risky investments and above all a very poor estimate of the risks from banks and local governments.
According to some analysts, the real estate sector may even be plunged into a vicious circle which might increase consumer mistrust as Chinese growth is stalling. According to official figures published in July, the gross domestic product of the world’s second largest economy grew in the second quarter by only 0.4% over one year.