3 months ago • 2 mins
What’s going on here?
One of China’s biggest developers has avoided defaulting on its debt… for now.
What does this mean?
Country Garden was once seen as one of China’s safest developers, but even a firm with a reassuringly rustic name can experience nasty twists of fate. And it’s not too hard to see why: home sales have been crumbling (in August they were down a staggering 72%) and homebuyer confidence is in a serious rut. That super weak market has left the firm struggling to make interest payments on its bonds – missing an initial deadline in early August, before rustling up the funds just in time to avoid defaulting this week. For investors, already biting their nails over China’s wobbly property sector, that move was probably a tad too close for comfort.
Why should I care?
Zooming in: Super-size shockwaves.
Don’t relax just yet. Country Garden’s still neck-deep in debt, to the tune of almost $200 billion. And here’s the kicker: a lot of the firm’s projects are in lower-tier cities, places with smaller crowds and lukewarm housing demand – areas, in short, that aren’t likely to benefit very much from any stimulus measure magic. And if things do go south, Country Garden’s heft means the fallout will be equally weighty. After all, Evergrande’s 2021 default was a shocker, and Country Garden oversees four times the number of property developments.
The bigger picture: Too little, too late.
The Chinese government has been trying to stabilize the crucial property sector lately, lowering minimum interest rates for first-time homebuyers in cities like Beijing and Shanghai last week. But analysts aren’t convinced these moves are enough: after all, big players, including Country Garden, are facing $8 billion in bond payments in the next six months, providing plenty of potential stumbling blocks for the industry.
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