2023-08-16 21:24:31
New signs of weakness for the Chinese economy. Two years after the collapse of its competitor Evergrande, it is the other giant real estate developer Country Garden Holdings which is in bad trouble.
Long reputed to be financially sound, Country Garden was unable to repay two interest payments on loans last week. The establishment risks a payment default at the beginning of September if it does not pay. Indeed, the group itself indicated that “considerable uncertainties” weighed on its reimbursements.
Its setbacks raise fears of a bankruptcy with immeasurable consequences for the financial system in China, two years after the descent into hell of its competitor Evergrande which had made the headlines.
Country Garden, which employs tens of thousands of employees, is on the Forbes list of the 500 largest companies in the world and has four times as many sites as its rival.
A debt estimated at at least 150 billion euros
“At present, there are considerable uncertainties regarding the redemption of the bonds,” Country Garden said in a statement to the Shanghai Stock Exchange.
Its situation is a source of nervousness on the markets because the group estimated its debt at some 1,152 billion yuan (150 billion euros) at the end of 2022. The Bloomberg agency puts it at around 1,400 billion yuan (176 billion euros). euros).
Good morning ! Welcome to a world where the Chinese real estate sector is faltering. Developer Country Garden suspends trading in 11 onshore bonds from today… pic.twitter.com/12raTvJ0Ub
— John Plassard (@JohnPlassard) August 14, 2023
Sign of its difficulties, Country Garden had announced during the weekend to suspend the quotations of a dozen bonds against all odds.
The group, which is due to publish its half-year results later this month, says it expects a net loss of around 45 to 55 billion yuan (between 5.6 and 7 billion euros).
To add to the pressure, 31 billion yuan (3.9 billion euros) of bonds will mature in 2024, according to the rating agency Moody’s, which last Thursday lowered the group’s solidity rating due to a “very high credit risk”.
A major risk for the Chinese economy
The housing reform in China, which created a genuine real estate market at the end of the 1990s, led to a meteoric boom in the sector, maintained by social norms, the acquisition of property often being a prerequisite for marriage.
But the massive indebtedness of promoters has been perceived in recent years by the authorities as a major risk for the country’s economy. Any collapse of Country Garden would therefore have catastrophic repercussions on the Chinese financial system.
To reduce the sector’s indebtedness, Beijing gradually tightened the conditions for access to credit for developers from 2020, which dried up the sources of financing for groups already in debt.
A wave of defaults followed, including that of Evergrande, which undermined the confidence of potential buyers and reverberated throughout the sector, against the backdrop of an economic slowdown in China. Chinese property prices fell in July at their fastest pace in a year, official data showed on Wednesday.
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