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From Evergrande to Country Garden: How China’s Property Titans Mirror Broader Economic Woes

Alina Wang
A native of New York, Alina has a Bachelors degree in Corporate Communications from Baruch College and writes about human rights, politics, tech, and society.
Published: September 5, 2023
A woman views models of apartment buildings at a real estate trade fair March 29, 2007 in Xian of Shaanxi Province, China. (Image: China Photos via Getty Images)

As the world’s second-largest economy continues to brace against significant stress in its property sector, the latest alarm bell was rung by Country Garden — one of its premier real estate developers. With a record reported loss of $6.7 billion in the first half of the year, the company’s future looks grim.

Deepening crisis

The company, in a recent announcement, expressed “deep remorse for its unsatisfactory performance.” But its predicament isn’t isolated: The ripple effects of China’s turbulent property market — responsible for approximately a third of the nation’s economy — are causing concerns about the stability of its post-pandemic recovery now that virus controls have been fully lifted. 


Country Garden’s woes were accentuated when it revealed a missed interest payment on its due bonds. Although it still lies within the 30-day grace period to address the payment, the company is said to be negotiating an extension for another bond repayment deadline. According to The New York Times, it must come up with $22.5 million this week to address overdue interest payments.

A file photo of commercial property in Huainan, Jiangsu Province in November of 2022. The Chinese government made a small first move to safeguard the country’s property development sector, which if it defaults, can imperil many critical national banks. (Image: STR/AFP via Getty Images)

“Country Garden is trying hard to fulfill debt obligations, but whether this can continue will depend on the effectiveness of this round of stimulus and regulatory relaxation (of curbs on the property sector),” Gary Ng, a senior economist with Natixis Asia Pacific, told Reuters.

In a warning filed with a regulatory filing body in Hong Kong, the agency said, “If the financial performance of the [Country Garden] group continues to deteriorate in the future, they could default on their debts.” The filing continued, “The group might not be able to fulfill the financial covenants of these borrowings, which may result in default in these borrowings and cross-default in certain other borrowings.”

RELATED: Asia’s Wealthiest Woman Loses $12 Billion in China’s Real Estate Crisis

Despite seeings its financial waters churn with uncertainty, however, Country Garden shares showed a surprising uptick, trading around 1 percent higher in Hong Kong on Aug. 31. This might hint at investors still holding some hope, or it could simply be the volatile nature of the stock market, said Ng. 

Evergrande: A preceding tale?

Country Garden’s narrative finds parallels with developer Evergrande, which was once the zenith of China’s real estate industry. However, when Beijing initiated rules in 2020 to limit borrowing by prominent property developers, companies began to feel the heat. 

RELATED: China’s Real Estate Giant Evergrande Loses Over $112bn in Two Years, Has Hundreds of Billions More in Liabilities

Evergrande’s aggressive expansion tactics culminated in debts surpassing $300 billion. Its financial quagmire caused multiple other developers to default on their debts, leading to numerous unfinished construction projects. On Aug. 18, Evergrande unveiled a loss of 33 billion yuan for the first half of the year, and filed for U.S. bankruptcy protection

A woman rides a scooter past the construction site of an Evergrande housing complex in Zhumadian, located in China’s central province of Henan on September 14, 2021. (Image: JADE GAO/AFP via Getty Images)

“The application is a normal procedure for the offshore debt restructuring and does not involve (a) bankruptcy petition,” Evergrande said in the filing, adding that it will be “pushing forward with its offshore debt restructuring.” 

The company’s restructuring of its offshore debt — totaling $31.7 billion — encompasses bonds, collateral, and repurchase commitments. Evergrande plans to discuss its restructuring plans with creditors later this month, with a Chapter 15 recognition hearing scheduled for Sept. 15, Reuters reported. 

To make matters worse, Evergrande’s shares plummeted almost 80 percent on their first day back in the Hong Kong trading scene after an 18-month hiatus. Over the past three years, Evergrande’s shares have dwindled in value by a whopping 99 percent. 

Broader economic implications

China’s struggles aren’t just confined to the property sector. Stagnant economic growth, escalating local government debt, and unprecedented youth unemployment rates pose serious challenges, experts note.

The trade war could end up worsening China’s real estate market at a time when it is already dealing with excess debt and starting to form a bubble. (Image via pixabay / CC0 1.0)

RELATED: Data Shows Massive Decline in US-China Trade

Highlighting the issue further, recent official data revealed that China’s manufacturing activity is on a decline, with the Purchasing Managers’ Index (PMI) registering at 49.7 in August. Although it marked an improvement from prior readings, the figure still remains below the 50-point mark, signifying a severe economic contraction.

The struggles of real estate giants like Country Garden and Evergrande are symptomatic of deeper economic issues plaguing the country as a whole.