Country Garden, China’s largest private real estate company, is on the verge of bankruptcy. At a time when the real estate industry, which was China’s economic growth engine, is on the decline, the “big bad news from real estate” is expected to further dampen real estate investment sentiment and shake the entire economy. There is also a possibility that the risk of non-gui yuan will hasten China’s deflation.
According to Bloomberg News and Hong Kong’s South China Morning Post on the 10th (local time), Country Garden recorded a net loss of 45 billion yuan to 55 billion yuan in the first half of this year in a Hong Kong stock market announcement the previous day. In the same period last year, it posted a net profit of 1.91 billion yuan, but its performance plummeted in a year. Country Garden’s net loss was revealed amid the failure to repay interest ($22.5 million) on two $1 billion bonds that expired on the 6th. Corporate stock prices plunged more than 40% compared to last month due to concerns over default.
If Country Garden fails to pay back interest within a 30-day grace period, it will officially be officially declared. The New York Times pointed out that even if the company pays interest and extinguishes the urgent fire, the problem will not be solved. This is because the maturity of bond payments will return every month by the end of this year, and $4.4 billion in bonds will be repaid to investors by 2024. In addition, two bonds that Country Garden failed to pay interest are currently trading at less than 8 cents. It was 75 cents in December last year. The Wall Street Journal said, “This means that investors expect the company to default.”
Moody’s, an international credit rating agency, lowered Country Garden’s credit rating by seven notches from B1 to Caa1, which means “unqualified for investment.”
