Country Garden, a prominent housing giant in China, has announced a delay in the publication of its annual results, signaling ongoing challenges within the country’s vast property sector. The company cited the need for additional time to gather information, citing the complexity of work amid its debt restructuring efforts.
Due to its failure to meet the March 31 deadline for posting earnings, Country Garden’s stock is expected to be suspended from trading under the rules of the Hong Kong stock exchange. With the market closed on Friday for the Easter holiday, trading is set to resume on Tuesday.
Once regarded as China’s largest property developer, Country Garden is grappling with a substantial debt burden amounting to approximately $194 billion. The company faced a default on its US dollar-denominated debt last year and recently received a liquidation petition in Hong Kong from a creditor due to non-payment of a loan worth 1.6 billion Hong Kong dollars ($204 million).
Country Garden attributed its challenges to the volatility of the Chinese property industry, which has made operations more challenging. Sales have plummeted for the developer, with contracted sales experiencing an 85% decline in February, marking the most significant monthly drop in at least seven years. Despite these setbacks, the company emphasized its commitment to delivering housing projects and called for patience from its creditors.
According to the filing, Country Garden and its joint ventures achieved the delivery of over 600,000 housing units in 2023, spanning 249 cities across China. Despite its current difficulties, the company appears to be striving to maintain its operational momentum and fulfill its housing obligations across the country.
Lurching from one crisis to another
The troubles facing Country Garden are reminiscent of those experienced by another major Chinese property giant, Evergrande, which has now become insolvent. Evergrande’s missed financial results in 2021 and 2022 initially exposed the massive debts and strains within China’s property sector, triggering repercussions across various facets of the world’s second-largest economy that persist to this day.
Chinese regulators have leveled accusations against Evergrande and its founder, alleging the inflation of revenues by a staggering $78 billion, marking the insolvent developer as the focal point of China’s largest-ever financial fraud case. Additionally, China Vanke, another prominent property player, has encountered significant challenges. Despite ranking second in sales last year, the Shenzhen-based company reported a sharp 46% decline in profit for 2023.
Moody’s recently downgraded Vanke’s credit rating to “junk” status, citing deteriorating liquidity conditions. State media subsequently reported discussions among 12 major banks, including the six largest state-owned lenders, regarding an emergency loan to prevent Vanke from following the trajectory of Evergrande and Country Garden.
The Chinese government has been grappling with efforts to revive the country’s faltering real estate industry, which has not only eroded the confidence of homebuyers, businesses, and investors but also posed significant threats to the broader economy.
Fitch Ratings, in a report released on Friday, adjusted its forecasts for China’s housing market downward, anticipating a 5%-10% decline in new home sales in 2024. Given the persistent stress within the property sector, achieving the targeted GDP growth rate of around 5% for China will prove “challenging,” according to Fitch Ratings’ assessment.
The interconnected woes of major property developers like Evergrande, Country Garden, and Vanke underscore the significant challenges facing China’s real estate industry and the broader implications for the country’s economic stability and growth prospects.