Country Garden, one of China's major property developers, has once again highlighted the ongoing property crisis in China by announcing its inability to make a debt payment of approximately $60 million.
This non-payment has raised concerns as Country Garden already bears a significant debt burden of around $187 billion. This announcement accentuates the mounting challenges the company faces in the current property market turmoil.
Deeper Financial Turbulence
In a regulatory filing in Hong Kong, Country Garden expressed its predicament, stating that current market conditions have hindered its ability to secure adequate cash to bolster its liquidity position. The company also highlighted the continued pressure on its cash reserves.
Of notable concern is the fact that Country Garden was traditionally considered a relatively responsible homebuilder in China, making it a preferred option for loans from state-backed banks due to its perceived stability. This non-payment of debt marks a significant shift in its financial standing.
Property Sector Crisis
Country Garden's woes are not isolated; they are indicative of the broader turmoil in China's real estate sector. Notably, this crisis has seen giants like Evergrande and Sunac China default on their debt.
Evergrande, in particular, abandoned a $35 billion debt restructuring plan, causing alarm among its bond investors who fear an uncontrolled collapse of the group.
Financial regulators in China have introduced several measures in an attempt to restore confidence in the property sector, a vital segment of the Chinese economy, constituting approximately 30%.
These measures include reduced mortgage rates for existing property holders and lower minimum down payment requirements. However, these efforts have yet to rekindle demand in the market.
National Golden Week's Impact on Consumer Spending
China recently concluded its National Golden Week holiday, a period known for driving consumer spending and real estate transactions.
While over 820 million people traveled within China during the eight-day holiday and generated more than $100 billion in revenue, these figures, though an improvement from the previous year, still fall short of official projections.
According to Goldman Sachs, this data suggests a deceleration in the services recovery, requiring further policy adjustments to stimulate consumption and services. Property sales during Golden Week were also monitored closely, revealing a 17% year-on-year drop in sales across 35 cities, a concerning sign for property developers in China.