The housing crisis continues to shake the Chinese economy. After Evergrande’s setbacks two years ago, all eyes are now on another jewel in the sector: Country Garden. Founded in 1992 in Guangdong province, Country Garden is considered the largest developer in China in terms of real estate sales. At least until now.
Because the company is currently in a more than tense financial situation, as a result of the crisis that is hitting a sector that has long represented a quarter of China’s GDP. Its debt was remarkably estimated at 1,152 million yuan (150,000 million euros) at the end of 2022. The Bloomberg agency even figures it at 1,400 million yuan (176,000 million euros).
On Wednesday, the group, long considered financially sound, warned that “considerable uncertainties” weighed on its repayments. To the point that in September there could be a default. With potentially catastrophic repercussions for the Chinese financial system and economy.
Country Garden, which is due to publish its half-year results by the end of the month, says it expects a net loss of around 45-55 billion yuan (5.6-7 billion euros). The company’s situation is all the more precarious as around 60% of its projects are located in small Chinese cities, where property prices have fallen the most and the bulk of its clients have the most limited purchasing power.
A megaproject that turns into a fiasco
Featured on Forbes’ list of the world’s 500 largest companies, Country Garden is also present abroad. The developer, who employed 70,000 people at the end of 2022, made a name for himself through a gigantic real estate project in Malaysia on artificial islands.
Launched in 2016, this $100 billion project called “Forest City” aims to create “the smart green city of the future” on four man-made islands in South Malaysia. Seven years later, the city that was to have an area of 30 km2 and house 700,000 inhabitants now looks like a “ghost town”, reports le figaro, while at this stage only 28,000 homes have been built on just one of the four islands. 90% of businesses would also be “abandoned”, the newspaper says. The price of housing, 2800 euros per square meter on average, is especially pointed out to explain this fiasco.
Country Garden, however, refuses to say that the project is “failed” and assures that it has only been slowed down by the Covid crisis and the slowdown in the world economy. It still promises its completion by 2035.
billionaire boss
Country Garden is run by Yang Huiyan, who until recently was the richest woman in Asia. The 40-year-old became a billionaire when she inherited shares from her father, the founder of Country Garden, in 2005. Since 2021, the low-key businesswoman has seen her fortune plummet regularly as the property crisis has severely weakened the sector.
Yang Huiyan, who has lost nearly $29 billion in two years according to Bloomberg’s billionaire rankings, has an estimated wealth of $5.3 billion. To support Country Garden, she and her family took the equivalent of $4.9 billion from her personal funds, according to the group.
In addition to real estate, its core business, Country Garden has also been present since 2019 in gastronomic robotics. It designs different types of food processors and last year opened a gigantic fully robotic restaurant in the city of Foshan, where the group is based. The establishment has capacity for 600 people and its twenty robots can prepare three types of dishes, including Chinese fondue, according to the official press.
Source: BFM TV
