The news is shaking the entire Chinese economy. In great difficulty, the property developer Country Garden, one of the largest in China, collapsed on the stock market on Monday, its share losing more than 18%. Its heavy debt (150 billion euros, and even 176 billion according to Bloomberg) weighs on its financial health and worries investors. One project in particular symbolizes the madness of grandeur of the real estate group, and is undoubtedly no stranger to the crisis it is going through.
Called “Forest City” and launched in 2016, this mega-project worth 100 billion dollars (91 billion euros) for a “smart and green city of the future” located in southern Malaysia, near Singapore, is proving to be a resounding failure. It is even called a “ghost town” by observers and the media who have visited the site. While it was supposed to accommodate 700,000 inhabitants on four artificial islands covering 30 km2, only a few thousand live there today. Only 28,000 residential units have so far been completed, and only one of the four islands fully developed. Nearly 90% of businesses are also abandoned, according to the Malaysian daily New Straits Times.
The fault in particular with the prices of housing, much too high for the local clientele. They would be sold around 2800 euros per m2, we learn in a report from France 2, when the average salary in Malaysia does not exceed 700 euros. Some apartments can even cost more than a million dollars (915,000 euros). As for the foreign buyers, in particular the wealthy Chinese, whom the project initially targeted, they were put off by the contradictory declarations of the Malaysian authorities. The Malaysian Prime Minister said in 2018 that he would not allow foreigners to buy in Forest City, before backpedaling. Added to this was the capital controls imposed by Chinese President Xi Jinping.
For its part, Country Garden is still trying to defend its luxury real estate project, where two golf courses, two luxury hotels, an international school, a factory and even a water park are already open. The Chinese developer told the New Straits Times that it was unfair to already call a project a “failure” that will be fully completed by 2035 and was only launched seven years ago. Despite everything, Country Garden announced at the beginning of August that it could reassess its development plans within two years if this becomes necessary. “Unforeseen factors such as the Covid-19 pandemic and the slowdown in the global economy have impacted the development momentum,” he acknowledged, adding that more than 100 foreign real estate agents had been hired for market Forest City to potential buyers. These projects could be turned upside down by the crisis that the group is going through.
