Property giant Country Garden's losses indicate fresh real estate crisis in China – experts warn

Beijing: China’s top real estate company ‘Country Garden’ has not paid interest dues on US dollar bonds. This information emerged as the company announced a seven billion-dollar loss in the first six months of 2023. The company has a total debt burden of $200 billion. Besides, it has surfaced that the company does not have enough money in its coffers to pay its interest. If the situation continues, companies may declare bankruptcy by next month, and China may face a new ‘real estate crisis’, warn analysts.

In 2020, Chinese President Xi Jinping launched a massive crackdown on the country’s property and housing sector. Due to this, many companies in China’s real estate sector were surrounded by difficulties. In 2021, the biggest company in China’s real estate sector, ‘Evergrande’ failed to pay the loan. After this, the company declared bankruptcy. In 2021 and 2022, the information about this company having a total loss of $81 billion has recently come to the fore.
Moreover, after ‘Evergrande‘ was declared bankrupt, China’s real estate sector sought help from the government. However, the Chinese government had completely ignored this area during the period of Corona and in the background of the subsequent lockdown and other problems. Its effect reappears with ‘Country Garden’, and experts have drawn attention to it. ‘Country Garden’ is said to be the largest real estate company in China.

Furthermore, ‘Country Garden’ has worked on 3000 house construction projects in China. More than 80 per cent of these projects are in ‘Tier 2’, ‘Tier 3’ and ‘Tier 4’ cities. The income of this company, which employs more than 70 thousand people, has declined by more than 18 per cent in the year 2022. In such a situation, the value of the company’s shares has slipped by 20 per cent in the last month itself. The company, which failed to pay two instalments of interest, has also called off plans to raise capital of $300 million through shares. The company’s ranking in China’s real estate sector has slipped from first to fifth.

The amount of unpaid instalments of interest and loan of ‘Country Garden’ is less than that of ‘Evergrande’, yet the current economic situation of China has not been like that of the year 2021, the analysts have cited. A few days ago, it was announced that China’s economy was deflated. In ‘Deflation’, the demand and sales of all products fall drastically, and the housing sector is not far behind.

The real estate sector accounts for 30 per cent of China’s economy. Given this, the decline in housing demand and sales will deepen the crisis in China’s economy. Like the year 2021, the government of China is not financially capable. Due to this, the possibility of getting relief by providing financial assistance to the real estate sector has also become negligible.

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