Country Garden has not paid up its coupon payment of US$22.5 billion. For those who do not follow the Chinese market, Country Garden is the largest private property developer. Before, it was no 2 with the largest China Evergrande starting to default on its debts and winded itself up as it couldn't pay all its bills in time.
It now seems the new no 1 is on the brink of collapse as well.
China Communist Party's Poor Response
2 weeks prior, the communist party responded with a policy statement that it will support the property sector. However, unlike the swift policy actions that followed previous statements, there has been no policy announcements made by the communist.
8 August: Country Garden Announces first non-repayment
While it is technically not a default yet, Country Garden has 30 days until 5 September to pay up its US$22 billion in repayments. However on its own, the developer is citing liquidity stress. As of end 2022, the company has RMB $140 billion in cash (USD $19.4 billion) on balance sheet.
On balance sheet, it does seem Country Garden does not have the cash to make payment and is facing liquidity issues.
Potential Second Crisis in China Property Market in 2 Years
Due to the balance sheet weakness of Country Garden and the poor execution by China Communist Government, we are looking at a second season of a China property credit crisis.
What we are witnessing today is the effects of a mismanagement by President Xi Jinping who urgently requires a policy response, otherwise he will be crashing China's economy.
No comments:
Post a Comment