Unpaid workers, silent sites: China’s property problems hit Country Garden

TIANJIN, China (Reuters) – In an unfinished apartment complex on the outskirts of the northern Chinese city of Tianjin, construction has slowed to a dull pace, while a few unemployed workers wander an almost empty building. location.

“They haven’t paid us our wages since Chinese New Year (in January). We are all worried,” said a worker named Wang, 50, who said he stopped working at the Yunhe Shangyuan site last week.

The sprawling complex is one of two projects Reuters visited on Friday in Tianjin, a port city of 14 million people 135 km southeast of Beijing. Both sites are run by Country Garden, China’s biggest developer by turnover before this year, and now mired in a debt crisis that threatens to spill over into the wider economy.

Construction has come to a partial or complete halt at both sites — the larger site has a few rows of unfinished five-storey apartment buildings, the other has lifeless cranes and thick green scaffolding hanging over the tall buildings. Workers in the dorms at the sites complained that they had not been paid for several months.

“I’m under a lot of pressure,” said a Yunhe Shangyuan site worker surnamed Wei, who is also in his 50s, adding that he has only received a one-time living stipend of 4,500 yuan ($618) so far this year. .

“I have a wife and a child who is about to go back to school, and also elderly parents… The workers cannot live on this.”

Once considered one of the most financially sound developers, Country Garden has now pioneered how the cycle has turned for developers.

Its financial woes have added to a debt crisis in China’s real estate sector, which accounts for nearly a quarter of the world’s second-largest economy, and which is currently losing steam amid stagnant housing and weak consumer spending.

Country Garden’s Yunhe Shangyuan project representative said in a Wechat statement that its “registered employees” have all been paid.

At the Yunjing Huateng site, the government in June ordered construction to be suspended to fix management problems, a project representative told Reuters in a separate statement. It has since passed inspection and is expected to resume work next week, the source said, adding that the suspension will have no impact on the target completion date of October 2024.

A representative of Yunjing Huating said that some of the workers are not directly employed by the developer, but by the contractor who “promised to pay the workers’ wages by the end of this month.”

The project’s contractor, Shenyang Tingyu Construction, did not receive calls from Reuters or respond to emails seeking comment.

The Ministry of Housing did not comment on Reuters inquiries regarding stopping construction in the real estate sector in general or Country Garden in particular.

Unfinished homes

Country Garden has nearly a million homes under construction, according to estimates by Japanese investment bank Nomura. It has not publicly acknowledged whether any of its projects have stopped construction due to financial constraints.

In an exchange filing dated August 10, Country Garden said it would “spare no effort to ensure delivery” of the apartments and that it would “ensure nationwide projects are operational” to fulfill its commitment to homebuyers.

Country Garden built its success by quickly selling a large number of units at low profit margins and by promising “five-star living” in smaller, less popular towns.

Gao Fei, director of investment advisory at the Tianjin branch of real estate agency Santalen, said Tianjin has about a dozen rural garden projects, most of which have been completed and handed over.

Gao said stalled construction projects are “relatively rare” in the city, accounting for about 10 of the 300 sites for sale, but “there are already projects whose development progress has slowed.”

“In China, it’s a common phenomenon because all developers now control the construction tempo based on the sales rate,” Gao told Reuters. “So once sales slow down, construction will also slow down.”

Confidence in the sector took a big hit last year after many Chinese homebuyers threatened to stop paying mortgages, as developers halted construction of previously sold housing projects due to a lack of liquidity and strict restrictions related to COVID-19.

China’s real estate market rebounded slightly in the first quarter of 2023, Gao said, but transaction volumes have declined since then, with the majority of urban housing markets remaining “in the doldrums.”

“We’ve seen that many homebuyers are affected by a lack of income, and their home buying choices and what they can afford has been affected in turn.”

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