On Monday night, Country Garden faced another test. The outcome could have an impact on the Chinese economy.
At the southern tip of the peninsula that makes up Malaysia, there is a giant housing project.
The Jungle City consists of a number of high-rise buildings housing luxury apartments. Most of them are empty. Nearly ten years after construction began, the project, which was supposed to consist of four artificial islands, has not yet been completed.
Because while apartment prices are falling, I write The Wall Street JournalThere is a group very interested in what was once a $100 billion project: the international creditors of Chinese real estate company Country Garden.
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I lost 70 billion
Along with Evergrande, another Chinese housing giant, Country Garden has become a symbol of the problems plaguing the Chinese real estate sector in recent years.
The company lost 48.9 billion yuan in the first six months of 2023, according to Semi-annual report. This equates to more than NOK 70 billion, the largest loss ever for Country Garden Financial Times.
“Smart and green”
The ghost town “Forest City” is owned by Country Garden Pacificview, a collaboration (“joint venture”) between Country Garden and the Malaysian government-backed company Esplanade Danga 88.
According to the project’s website, the area will become a “smart and green future city” that combines the environment and innovative technology to create an “ideal, poetic and technology-based” ecosystem.
But in 2023, the downturn in the real estate sector and lack of confidence in the capital market are putting increasing pressure on Country Garden’s business operations, according to the company itself.
This led them to the end of August He missed two payments of interest On dollar bond loans totaling $22.5 million.
The payment problems have raised fears that the crisis in China’s real estate sector will spread to the rest of the economy.
Continuous low consumption, deflation deflation The term is used when prices fall (the opposite of inflation)The sharp decline in exports did not improve matters.
However, a bright spot came in August. Prices then rose again, after witnessing a steady development in June, before falling in July.
On Monday evening, Norwegian time, several creditors had a deadline to vote on whether Country Garden should get an extended repayment period on eight bond loans, the news agency reported. Reuters.
The creditors agreed to extend the payment postponement for six of them, according to what he mentioned CNBC. This helped lift the stock Tuesday morning.
Two loan deferrals are still pending approval.
If Country Garden ends up defaulting on its loans, it would exacerbate China’s real estate crisis and put more pressure on the economy.
194 billion debts
It would also likely lead to creditors wanting to take control of the company’s assets abroad, John Hahn, a partner at the law firm Kobre & Kim, tells the Wall Street Journal.
Some features of the country’s legal system make it difficult to acquire assets located in China.
The lawyer estimates that the ghost town “Forest City”, as Country Garden’s most valuable overseas property, could help creditors recover about $1.5 billion.
This is still just a small fraction of the total debt that was at the end of June $194 billion.
But for now, stunning photos of the area are still being posted on the project’s Instagram account. The photos show golf courses, beaches with chalky white sand, and spacious apartments.
– People started coming slowly
Since this summer, the Chinese authorities have introduced several aid measures targeting the real estate sector in particular and the economy in general.
Major bank Goldman Sachs still estimates that China will be the world’s largest economy in 2035, while other economists believe it is close to the top.
Recently, Forest City has seen an increasing number of tourists from Indonesia and some buyers from South Korea looking for golf facilities, the Wall Street Journal writes.
“People are starting to come slowly, but they are coming,” 35-year-old Mitterrand tells the newspaper.
When he moved into his building, he was the only person living on his floor. Now he has a neighbor.
“Organizer. Social media geek. General communicator. Bacon scholar. Proud pop culture trailblazer.”