Country Garden, one of the largest property developers in China, has become the latest real estate behemoth to warn that it may default on its loans. Country Garden is one of China’s most prominent property developers.
This news came as the troubled corporation announced a record loss for the first half of the year, amounting to $6.7 billion (£5.2 billion).
In their statement, Country Garden expressed that it was “deeply remorseful for the unsatisfactory performance.”
Concerns regarding the post-pandemic recovery of the world’s second largest economy have been increased as a result of the statement.
In addition to this, Country Garden disclosed that it had failed to make interest payments on bonds that were due earlier this month. Nevertheless, it stated that it was still within the grace period of thirty days to complete the payments.
According to reports, it is also attempting to push back the due date for the repayment of yet another bond.
The company issued a warning that it might not be able to pay its debts “if the financial performance of the group continues to worsen in the future.”
According to a regulatory filing that Country Garden made in Hong Kong, the company stated that “the group might not be able to fulfill the financial covenants of these borrowings,” which could lead to a default on these borrowings as well as a cross-default on certain other borrowings.
The corporation issued a warning earlier this month indicating that it may see a loss of up to $7.6 billion for the first six months of the year. The corporation published an estimate that ranged from 45 billion yuan to 55 billion yuan, and the record loss came in at the lower end of that range.
On Thursday morning, Country Garden share prices were trading approximately one percent higher in Hong Kong.
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As a result of the crisis, China Evergrande’s stock dropped over 80 percent.
Problems in China’s real estate market, which covers everything from the construction of homes to enterprises that make the items that go in them, are having a significant influence on the country’s economy because the real estate sector accounts for around one third of the total GDP.
The real estate business in China was shaken up in 2020 when new regulations were implemented to govern the amount of money that large real estate corporations could borrow. These regulations were intended to limit the amount of money that these firms could borrow.
As it aggressively developed to become one of the largest firms in China, Evergrande, which was once China’s top-selling developer, piled up debts of more than $300 billion. This put the company in serious financial trouble.
Its financial woes have caused a rippling effect throughout the country’s property market, which has resulted in a number of other developers defaulting on their obligations and abandoning incomplete building projects all around the country.
Evergrande announced over the weekend that it had incurred a loss of 33 billion yuan for the first half of the year.
On Monday, the company’s shares experienced a drop of about 80 percent on their first day of trade in Hong Kong in over a year and a half.
As a result of Beijing’s crackdown on property companies over the past three years, the value of Evergrande shares has decreased by more than 99%.
China is struggling with a number of issues, including sluggish economic growth, soaring levels of local government debt, and unemployment rates among young people that have never been seen before.
The official statistics that was released on Thursday revealed that the level of activity in China’s factories had decreased for the fifth consecutive month.
In August, the Purchasing Managers’ Index registered at a reading of 49.7. It was better than the previous month, but it was still below 50, which indicates that contraction is still occurring.
