Amidst growing economic uncertainty, news of major developer Country Garden’s inability to meet $22 million in bond payments rings alarm bells for China’s private property companies. The missed payments signal a looming tipping point for these companies unless swift financial support materializes.
Country Garden’s significant status in the industry raises the possibility of regulators implementing stronger aid measures, although doubts remain about their effectiveness in the debt-laden sector’s recovery.
Country Garden’s failure to make coupon payments on two dollar-denominated bonds, combined with shrinking imports and exports, intensifies concerns.
The property sector, accounting for a quarter of China’s economy, has already witnessed multiple debt defaults by developers since 2021. While some state-backed developers also face challenges, hopes for government support persist.
The missed payments have triggered a sell-off in shares and bonds across the sector, underscoring the risk of contagion.
However, experts caution that it may accelerate policy measures aimed at supporting the housing market. China’s central bank’s recent pledge to guide financial resources towards the private economy reflects a broader push for confidence-building.
Market participants are anxious about Country Garden’s massive upcoming bond payments. Despite a possible grace period for the latest coupon payments, the company faces a significant hurdle in managing its payment schedule. The overall outlook for home sales remains bleak, further dampening buyer sentiment.