Chinas Immobilienkrise schürt Ängste vor Ansteckung

Troublesome Chinese property giant Country Garden faces the risk of defaulting on its bond payments next month, which could have disastrous consequences for the world’s second-largest economy. The company’s debt problems come two years after its competitor Evergrande unraveled. Here’s why Country Garden’s situation is being closely monitored by the markets.

Country Garden was China’s largest private developer in terms of sales last year. It has extensive operations in small cities, where recent drops in China’s property prices have been most pronounced and customers have limited purchasing power. The company listed over 3,000 active construction sites at the end of 2022, including around 30 abroad. Any prolonged suspension of work at these sites could lead to social unrest, as Chinese homeowners often pay for new properties before they are fully constructed. Country Garden has four times as many projects as Evergrande, and the latter’s stalled development led to protests and payment strikes last year.

At the end of 2022, Country Garden had accumulated a massive debt estimated at around 1.152 trillion yuan ($157 billion). Other estimates put its overall debt as high as 1.4 trillion yuan. The company had cash totaling 147.5 billion yuan ($20.2 billion) at the end of 2022. Last week, Country Garden failed to make two bond payments and now faces the risk of default as more bond maturities are expected in September. Moody’s rating agency stated that 31 billion yuan ($4.2 billion) in bonds will expire in 2024. Evergrande, once China’s top property developer, had nearly $340 billion in debt and $2 billion in cash at the end of 2022.

The setbacks faced by Country Garden and Evergrande have further weakened the property sector, which was already battered by the Covid pandemic and the general economic slowdown in China. This situation has fueled mistrust among potential buyers and worsened the financial situation of developers. State-backed company Sino-Ocean recently defaulted on an interest payment and expects record half-yearly losses this month. Real estate prices in China fell in July at the fastest pace in a year, according to official figures. Analysts warn that China’s debt problems are likely to worsen as recessionary and deflationary pressures mount and Chinese enterprises struggle to make profits.

During the boom years of the property sector, many Chinese developers relied on trust firms or asset managers to finance their projects. Zhongzhi, a Beijing-based conglomerate, is one of the most important players in the market, managing over one trillion yuan in assets. However, Zhongzhi has recently been unable to make some payments, causing significant losses to investors. Concerned investors gathered outside one of the firm’s subsidiaries to demand accountability. Any default by the Zhongzhi conglomerate risks exposing China’s massive financial and debt „iceberg,“ according to analysts

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China’s property sector crisis fuels fears of contagion

Troubled Chinese property giant Country Garden risks defaulting on its bond payments next month, which could have disastrous consequences for the world’s second-largest economy. The firm’s debt woes come two years after the unravelling of its competitor Evergrande. Here is why Country Garden’s plight is being closely monitored by markets: – How important is Country Garden? – Country Garden was China’s largest private developer in terms of sales last year. It has extensive operations in small cities, which host about 60 percent of its projects. But that is where recent drops in China’s property prices have been most pronounced and where customers have limited purchasing power. At the end of 2022, Country Garden listed more than 3,000 active construction sites

Details zu China’s property sector crisis fuels fears of contagion