There are increasing concerns on the financial markets that the real estate crisis in China could worsen further. Just a few weeks ago, at the end of January, the news came that Evergrande, one of China’s largest real estate companies and heavily indebted to the tune of $300 billion, would be forcibly broken up. Now the next big player in the industry is threatened with liquidation: Country Garden.
The Chinese real estate group, already struggling, announced on Wednesday that a creditor had filed a liquidation petition against it in a Hong Kong court. The accusation: Country Garden did not repay a loan worth the equivalent of almost 190 million euros, including interest. The court has set the first hearing in the case for May 17, according to the company listed on the Hong Kong Stock Exchange. The application will be “vigorously opposed”.
China’s real estate sector contributes around 20 percent of economic output
Country Garden, based in Foshan, southern China, was once considered China’s largest real estate developer by sales volume. The company is burdened by a gigantic mountain of debt worth the equivalent of 180 billion euros.
According to its own information, Country Garden is currently working on a restructuring together with foreign creditors. Country Garden says the liquidation application is not expected to have a “significant impact” on this process or its timeline. On the Hong Kong stock exchange, the company’s shares temporarily slipped by twelve percent.
The crisis in the real estate sector, which contributes around 20 percent of the country’s economic output, is weighing heavily on China’s economy. The government in Beijing is trying to counteract this by relaxing lending rules and drawing up a list of construction projects in which banks should invest. Country Garden’s crisis is undermining state leaders’ efforts to restore confidence in the faltering real estate sector.