Concern is mounting in China around Country Garden, a real estate flagship whose abysmal debt raises fears of a bankruptcy bringing social and economic instability for the country, two years after the setbacks of its competitor Evergrande.
Country Garden is a real estate giant that is listed in the Forbes list of the 500 largest companies in the world. He was still the biggest seller of real estate in China last year despite the crisis in the sector. Country Garden is also present abroad with a gigantic real estate project in Malaysia on artificial islands.
Based in Foshan (southern China), the group employed nearly 70,000 “full-time” people at the end of 2022, according to the most recent figures from the company, long deemed financially solid. Founded in 1995, the group has been caught up in recent months by the sluggishness of the Chinese real estate market. According to press reports, he was unable last Monday to pay two interest repayments on loans.
Country Garden has a 30-day grace period and risks defaulting in September if it doesn’t pay. To add to the pressure, 31 billion yuan (3.9 billion euros) of bonds will mature in 2024, according to the rating agency Moody’s, which on Thursday lowered the group’s solidity rating to “Caa2”, synonymous with “very high credit risk”.
Country Garden, which is due to publish its half-year results by the end of the month, says it expects a net loss of around 45 to 55 billion yuan (between 5.6 and 7 billion euros). Country Garden’s situation is all the more precarious because around 60% of its projects are located in small Chinese cities, where property prices have fallen the most and the majority of its customers have the power most limited purchase.
At the end of 2022, Country Garden had a colossal debt estimated by the company at some 1.152 billion yuan (150 billion euros). But the Bloomberg agency puts it at around 1.4 trillion yuan (176 billion euros). Like Evergrande, its competitor in debt to the tune of more than 300 billion euros, any collapse of Country Garden would have catastrophic repercussions on the financial system and the Chinese economy.