China’s economy faces a crippling collapse, with a £189 billion company on the brink of collapse

Shares in real estate developer Country Garden went into free fall on Monday after the Chinese developer touted billions of dollars in losses and halted trading on nearly a dozen of its corporate bonds.

For Country Garden, formerly China’s top-selling real estate developer, trouble began when the company missed international bond repayments, prompting a panic sell-off of the company’s own bonds.

The real estate company halted trading on 11 of its mainland China bonds in a bailout and saw prices fall as much as 18.4 percent in Hong Kong.

Country Garden’s stock, which is the worst-performing Hang Seng Index in 2023, was down 63 percent on Monday before staging a slight rebound on Tuesday, fueled by bargain hunters.

Unfinished residential buildings stand at a residential complex in Guilin, China, on September 17, 2022.

REUTERS/Eduardo Baptista

It comes after the company’s controlling shareholder, Yang Huiyan, downplayed his expectations for earnings in a Hong Kong IPO last Thursday.

Huiyan, one of the richest people in the country, hinted that Country Garden would post a net loss of between 45 and 55 billion yuan (4.88 to 6 billion pounds), a sharp drop from the profit of 210 million pounds in the first half of 2022 South China Morning Post.

Ivan Bayoukhi, founder and owner of precious metals-focused investment forum Wall Street Silver, posted on X, formerly known as Twitter, “China’s second-largest project developer Country Garden, with annual sales exceeding $70 billion, is on the brink of collapse.”

“The company’s 8 percent bonds due 2024 are trading at a measly eight cents, which means massive losses for bondholders.

“The return is exploding, which means nobody expects it to be paid out. China’s real estate crisis continues.”

The logo of real estate developer Country Garden can be seen on a building in Dalian, Liaoning Province, China.

REUTERS

According to the South China Morning Post, Country Garden is considering rolling over some soon-to-be-matured bonds.

According to the latest figures from Statista, Country Garden, China’s sixth-largest developer, had a total fortune of £189 billion in 2023.

Concerns over the possible impending demise of Country Garden have shaken market confidence as a Hong Kong index that tracks mainland real estate fell as much as 4.5 percent on Monday.

Fears are also being voiced in the West, with some economists making uncomfortable comparisons to the 2008 US housing market collapse.

Julian Jessop, Economics Fellow at the Institute for Economic Affairs (IEA), told The Express: “China is now a major player in the global economy, so there is concern that any problems there will affect the rest of the world.”

Hong Kong skyline.

REUTERS/Tyrone Siu

“After all, the 2008 global financial crisis was triggered by a collapse in the US housing market.

“The immediate contagion from the problems at Country Garden should be limited.

“China’s real estate market is dominated by local companies and the authorities have the tools to deal with the consequences (e.g. by forcing state-owned banks to continue lending).

“But continued weakness in this sector will severely slow down Chinese growth for many years to come.

He continued, “A big part of the contagion problem is uncertainty, and this is often greater in China due to the lack of reliable information.”

CHINA CURRENT:

“There are a number of ways a crisis there could affect us, including weakening Chinese demand for UK exports, Chinese companies selling goods in Western markets, or Chinese investors withdrawing money from the UK, to support their domestic businesses.”

“You never know exactly with China!”

Beijing has so far been reluctant to step in and bail out the country’s developers. Dozens of firms have gone under since the Evergrande tsunami of 2021 defaults.

Evergrande has earned the unwelcome title of the world’s most heavily indebted developer as the company last month announced losses of $81 billion (£63.6 billion) for 2021 and 2022.