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Chinese real estate developer Country Garden posted a loss of 48.9 billion yuan ($6.7 billion) in the first half of the year, underscoring the challenges it faces as it fights to survive a liquidity crisis in the country’s property sector.
The results on Wednesday reflected a dismal six months for the property group, the country’s biggest private developer by sales and until recently considered safer than many of its peers.
Country Garden’s biggest ever loss also points to a bleak outlook for an industry that typically accounts for more than a quarter of China’s economic activity. The company will post a loss of 6.7 billion yuan in the second half of 2022 after recording a profit of 612 million yuan in the first six months.
Revenue in the first half of the year rose 39 percent to 226 billion yuan, the developer said, but added that in order to “ensure the on-time delivery of finished houses,” the developer “balanced between the sales volume and selling price of some real estate projects. strike a balance.”
Concerns about Country Garden’s financial health intensified earlier this month after it failed to pay coupons on international bonds. On Tuesday, the developer asked Chinese creditors for a 40-day grace period for yuan-denominated bonds due next week.
The company’s woes are the latest in a two-year real estate liquidity crisis that began with the default of developer China Evergrande in 2021 and showed signs of spreading to China’s investment sector this summer.
Country Garden said it had liabilities of about 136 million yuan by the end of the first half of 2023. The company said it would “consider various debt management measures to defuse” what it called “phased liquidity pressures”.
Beijing cracked down on the leverage of domestic developers early in the pandemic, but the government has since been forced to ease policy as the economy slows with little sign of improvement.
Reflecting pressure on authorities, the southern cities of Guangzhou and Shenzhen eased mortgage conditions for first-time buyers on Wednesday. The cap on bank mortgage lending was originally part of a broader approach aimed at tackling overheating house prices.
Since then, a prolonged economic slowdown has hit home prices as sales slump and construction of new apartments is delayed.
The government has not stopped any bailouts, but its attitude toward Country Garden is closely watched.
Chinese developers face $38 billion in renminbi and dollar bond payments maturing in the next four months, according to Dealogic.
“Developer defaults will definitely continue, as almost all private developers are under cash flow pressure, and this pressure is not going away anytime soon,” said Bruce Peng, chief economist for Greater China at JLL. “Any policy support Both arrivals will take time to affect cash flow, home sales and new construction starts.”
Country Garden had planned to raise $300 million through a stock offering at the end of July, but abruptly called off the deal at the last minute.
The developer also announced Wednesday that it plans to issue HK$270 million ($34 million) of new shares in Hong Kong at a discount of 15 percent to Tuesday’s closing price, with all funds raised earmarked to repay existing loans.
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