![]() ![]() But Country Garden has nearly four times as many housing projects in China, leading to fears of social unrest if construction halts. ![]() Country Garden’s sales were down by 60%.Ĭountry Garden’s liabilities total 1.4tn yuan (£151.1bn), about 60% the size of Evergrande’s. New home sales for the top 100 property developers declined by 33% in July, compared with 2022, according to S&P Global Ratings, a ratings agency. “But it is too drastic a change in a very short period of time … it created a downward spiral in the liquidity situation for property companies.”Īs confidence in the real estate sector has plummeted, so have home sales, depriving developers of much-needed cash to complete construction works and meet interest payments. Buyers in hundreds of cities have staged mortgage boycotts in protest at the unfinished developments.ĭan Wang, the chief economist in China for Hang Seng Bank, said that “to a certain extent” the government’s three red lines policy has been a success in deleveraging the sector. The turmoil in China’s property sector has left suppliers unpaid and homebuyers, who have often made hefty downpayments, without their apartments. Country Garden, which missed two dollar bond payments last week, has until early September, when the grace period on those payments expires, to quell fears that it is about to tumble into the same fate. Since then, companies responsible for about 40% of Chinese home sales have defaulted. The red lines set limits on liabilities-to-asset ratios and ensure companies hold cash reserves equivalent to at least 100% of short-term debt. It is the world’s most indebted property developer, with more than $300bn (£236bn) in liabilities.Ĭountry Garden, which was once China’s largest property developer by revenue, also faces a risk of default in the coming weeks.Ĭountry Garden is one of the few major homebuilders to have avoided default since Beijing introduced a “three red lines” policy in 2020 that was aimed at reining in the debt levels in the highly leveraged sector. Holders of the company's $20 billion in offshore debt appear further back in the creditor queue and bondholders have said interest payments due in the past few weeks have failed to arrive.Įvergrande faces deadlines on dollar bond coupon payments totalling $162.38 million in October.The filing from Evergrande, which defaulted in 2021 after a liquidity crisis, came a day after China’s securities regulator notified the company’s Chinese branch that it was being investigated for suspected disclosure violations. ![]() The group said last month it had negotiated a settlement with some domestic bondholders and made a repayment on some wealth management products, largely held by Chinese retail investors. Shares in Evergrande have plunged 80% so far this year, while its bonds have held steady at distressed levels. "However, having said that, offloading some assets may not be totally sufficient, the key for Evergrande is to get project construction going and to sell inventory." "It is definitely a positive move towards solving Evergrande’s liquidity crisis and we expect more to come," said Gary Ng, senior economist Asia Pacific at Natixis. Still, the possible deal activity lifted shares in Evergrande's electric vehicle unit (0708.HK) by 29% but cast a pall over regional stocks and global markets (.MIAPJ0000PUS). Monday's share trading suspension knocked the offshore yuan, which fell about 0.3% against the dollar, and weighed on the Hang Seng benchmark index (.HSI). Nervousness has eased after China's central bank vowed to protect homebuyers' interests, but ramifications for China's economy kept investors on edge - particularly as signs of distress have begun spreading to Evergrande's peers. With liabilities equal to 2% of China's gross domestic product, Evergrande has sparked concerns its troubles could spread through the global financial system. Evergrande's property services business, which says it managed a total contracted floor area of 810 million square metres at the end of June, was also profitable in the first half of 2021, based on its financial statements. ![]()
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