Chinese real estate developer Country Garden, which had been suffering from severe financial difficulties, failed to pay bond interest on the 25th and fell into default, drawing attention to the impact on the Chinese economy.
Considering that the real estate market accounts for more than 20% of China’s total gross domestic product (GDP), Country Garden default declaration will not stop at simply influencing the real estate sector.
Country Garden has said several times that it will be difficult to repay the debt, but this is the first time it has fallen into default.
This is because it has become difficult to secure funds due to the sluggish real estate market in China.
Country Garden is currently seventh in the ranking of Chinese real estate developers, but it was China’s largest company until it faced financial difficulties.
Even now, more than 3,000 real estate projects are still being carried out across China, and the number of employees reaches 70,000.
Looking at the size of the real estate project, Evergrande Fell Into Default in 2021It is about four times the size of the group.
For this reason, experts predict that the impact of the Country Garden default will be greater than that of Evergrande.
The default of Evergrande Group in 2021 was an opportunity to shake up stability in China’s economy as a whole.
Due to the Evergrande crisis and the power crisis, China’s GDP growth rate in the fourth quarter of 2021 was 4.0%, the lowest level in a year and a half since the second quarter of 2020 when the impact of the spread of COVID-19 was in full swing.
Although the company declared its first default on the day, it is difficult to tell how far this situation will go, so it is evaluated that this incident will serve as another “brain tube” for the Chinese economy.
The grace period for interest payments worth $40 million will end on the 27th, and $48.76 million and $17.88 million, respectively, from the 7th to the 8th of next month.
Cross default means that if insolvency occurs in one debt contract, the creditor unilaterally declares insolvency for the debtor’s other debt.
Country Garden’s total debt is reportedly $187 billion, the largest among private real estate developers in China.