The debt crisis of property developer Country Garden has raised fears that its contagion will spread through China's already sputtering economy
China’s largest developer by sales value before this year, Country Garden’s debt crisis has raised fears that its contagion will spread through theSmaller Chinese cities, whose revenues have already been deteriorating, could have a glut of unfinished homes, a social problem Beijing is trying to avoid.
“It needs at least 30 billion yuan of sales a month to break even but they have been only 10 to 20 something billion yuan [a month] this year because sales in tier-three and fourth cities are very bad now,” said Oscar Choi, chief investment officer of Hong Kong-based Oscar and Partners Capital Limited.Country Garden built its success by quickly selling a large number of units for low margins. Much of its scale was achieved through acquiring large, low-cost parcels of land from local governments.
Land sales revenues in the first half of 2023 were only 50% of those in the same period of 2021, with smaller cities more affected since they are more dependent on land sales, the bank said.
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