#CHINESE PROPERTY DEVELOPER DEFAULT SERIES#

The counter will be removed from the Hang Seng Index on Sep 4 following the index’s latest quarterly review.Įxperts said that news of yet another top developer teetering on the brink of a default will be a further blow to market confidence and may exacerbate the downturn in China’s property sector. Shares of Country Garden listed in Hong Kong have plummeted nearly 70 per cent year to date. Total liabilities for the January to June period stood at 1.4 trillion yuan.Ĭountry Garden said it was “deeply remorseful” for the record losses and warned of default risks if its financial performance continues to deteriorate.Īnalysts noted that the developer is particularly susceptible to weak demand because it focuses on the lower end of the property market. The company’s first-half results announced on Aug 30 showed a record net loss of 48.9 billion yuan (US$6.72 billion), up substantially from a 6.7 billion yuan net loss in the second half of 2022 and a 612 million yuan net profit in the first half of 2022. It is also seeking to get creditor support on Aug 31 to add a 40-day grace period for the maturity of a yuan bond due on Sep 2, and extend repayment by three years. It has 30 days to pay up to avoid a default. The developer’s liquidity stress came to light after it missed two dollar bond coupon payments on Aug 6. “Country Garden’s problems underscore just how bad financial strains in the property sector have become, as well as the failings of existing policy support measures,” Mr Evans-Pritchard wrote in a report dated Aug 16. The private developer was included in a government list of “high quality” developers eligible for funding support from state-owned banks in November last year. “This is noteworthy because, in addition to its size, Country Garden was previously viewed as being in relatively good shape compared to most other private developers,” said Julian Evans-Pritchard, head of China economics at Capital Economics. This time, it is another property titan Country Garden in the headlines for financial distress.

Reports have said the number of defaults comes up to companies accounting for 40 per cent of Chinese home sales, with most being private property developers.

#CHINESE PROPERTY DEVELOPER DEFAULT SERIES#

One of the largest casualties was Evergrande, which was one of China’s largest developers but has turned into the poster child of its sector’s woes after being declared to be in default in late 2021.įollowing a prolonged debt restructuring, Evergrande – the world’s most indebted real estate company with debts of more than US$300 billion – filed for protection from creditors in a US bankruptcy court on Aug 17.īeyond Evergrande, the sector has seen a series of developer defaults since 2021. Unable to borrow and struggling to sell apartments, developers that had been operating far outside the “three red lines” were thrust into a severe cash crunch, resulting in unfinished homes and unpaid suppliers and creditors. These essentially tightened conditions for developers to access credit. In August 2020, Beijing rolled out a “three red lines” policy, a trio of metrics on debt that developers have to meet if they want to borrow more. It was also during this time when the Chinese government moved to rein in the massive debt accrued by the industry’s biggest players over the decade-long building boom. These challenges deepened during the COVID-19 pandemic which hurt employment and increased income uncertainties. Previously fuelled by economic and population growth, China’s property sector has in recent years fallen on harder times, partly as the domestic economy slowed and housing demand cooled. Here’s what you need to know: What went wrong? This comes two years after similar woes at Chinese property titan China Evergrande, which ignited rare protests in the country by aggrieved home buyers and retail investors.įor decades, the property sector served as one of the key growth engines of the Chinese economy, accounting for around a quarter of economic output. Intensifying tremors within the sector have inevitably renewed fears about potential spillover effects on the rest of the country’s economy and beyond. SINGAPORE: Default risks are once again flashing in China’s real estate sector.Ĭountry Garden, which was the country’s largest property developer by sales volume before this year, is faltering amid record losses, mountains of debt and missed payments to lenders and workers.

Chinese property developer default