Troubled Chinese developer Country Garden reported a loss of 48.9 billion yuan ($6.7 billion) in the first half of the year in a stock exchange filing on Wednesday, adding to fears of a possible catastrophic default.
Its fragile state has raised fears of a collapse that could have far-reaching consequences for the Chinese financial system, two years after the fall of Evergrande.
Country Garden, which was the largest real estate company in China last year, has four times as many ongoing construction projects as Evergrande. When the latter halted construction projects recently Homebuyers are outragedwho staged demonstrations and stopped mortgage payments in protest.
evergrande, The most indebted real estate company in the world With $328 billion in liabilities, it has lost more than 99% of its market value in shares over the past three years. The company resumed trading on the Hong Kong Stock Exchange on Monday after a 17-month suspension used by Evergrande to try to restructure its overseas debt.
Country Garden, one of China’s largest construction firms, has accumulated more than $150 billion in debt and said this month it had failed to make interest payments on two loans.
It is one of the few major homebuilders to avoid default since Beijing introduced its “three red lines” policy in 2020 aimed at reducing debt levels in the highly leveraged sector. Red lines set limits on liability-to-asset ratios and ensure that companies maintain cash reserves equivalent to at least 100% of short-term debt.
The group warned on Wednesday that if its “financial performance continues to deteriorate” it will face the possibility of default.
If Country Garden does not meet the deadline for a bond payment at the beginning of September, it could become the biggest Chinese real estate company to go bust since Evergrande in 2021.
The company’s cash flow problems have raised concerns that unrest could spread The economy and financial system in China.
The rise of the world’s second largest economy has been largely dependent on real estate and construction, which account for about a quarter of China’s GDP.
Country Garden’s losses in the January-June period were on par with the estimates it announced in early August of 45-55 billion yuan. During the same period last year, the group made a small profit of 612 million yuan.
Country Garden said in its filing to the Hong Kong Stock Exchange: “The downturn in the real estate sector, coupled with the lack of confidence in the capital market yet to be restored, put increasing pressure on the company’s business operations.”
It added that it “will do its best to improve operating cash flow by ensuring good sales performance, strive to revitalize underperforming assets and reduce unnecessary administrative expenses.”
The earnings report was released as Country Garden negotiates with creditors to reschedule debt payments to avoid default.
Bloomberg reported that a vote by bondholders to extend the payment terms was scheduled to take place on Friday last week but was postponed.
On Wednesday, Country Garden also proposed issuing 255 million yuan worth of new shares.
In its latest filing, it said the company had “exerted every effort” to make principal and interest payments.
Country Garden provides employment to tens of thousands of people and has been ranked by Forbes magazine as one of the 500 largest companies in the world. Its president, Yang Huiyan, was until recently the richest woman in Asia.
The problems of Country Garden and Evergrande further weaken a real estate sector that has been hit hard by the pandemic and China’s economic slowdown. These problems also discourage potential homebuyers, which may lead to increased pressure on other real estate companies.
In a sign of market weakness, home prices fell in July at the fastest pace in a year, according to government figures.
The authorities are taking steps to boost the primary sector now, with major cities Guangzhou and Shenzhen taking steps to relax mortgage rules.
With Agence France-Presse