Country Garden, one of China's major real estate developers, has issued a warning about the potential of defaulting on its debt obligations, joining the ranks of troubled property giants in the country, BBC reports.
This announcement follows the company's disclosure of a significant loss of $6.7bn (£5.2bn) for the first half of the year, marking a record low performance for the firm. Country Garden expressed regret for its subpar results in a statement, further fueling concerns about the recovery of the world's second-largest economy in the wake of the pandemic.
The property developer also revealed its failure to make interest payments on bonds that were due this month. However, it specified that it still had a 30-day grace period within which to settle these payments. Additionally, reports indicate that Country Garden is seeking an extension of the repayment deadline for another bond.
The company cautioned that a future deterioration in its financial performance might lead to defaults on its debts, possibly jeopardizing its ability to fulfill financial covenants and resulting in cross-default on certain other borrowings.
China's real estate industry, which encompasses everything from construction to related industries, constitutes around a third of the country's economy. The sector faced turmoil when regulations were introduced in 2020 to restrict borrowing by major real estate firms.
Evergrande, once a dominant player in China's property market, amassed a debt load exceeding $300bn as it expanded aggressively to become a major corporate entity in the country. Its financial troubles have sent ripples through the industry, with various developers struggling to meet debt obligations and leaving incomplete building projects nationwide.
Over the weekend, Evergrande reported a loss of $4.5bn (33bn yuan) for the first half of the year. Its shares plunged by nearly 80% on Monday, marking its first day of trading in Hong Kong in a year and a half. Over the past three years, Evergrande's shares have lost over 99% of their value due to stringent regulatory measures on property firms by the Chinese government.
In addition to the property crisis, China is grappling with other challenges including slow economic growth, mounting local government debt, and record-high youth unemployment. Official data from Thursday revealed a fifth consecutive month of factory activity contraction, with the Purchasing Managers' Index registering at 49.7 in August. While this showed slight improvement from the previous month, it still remains below the 50 threshold that signifies contraction.
Follow Daryo's official Instagram and Twitter pages to keep current on world news.
Comments (0)