High Debt
The real estate developer had already obtained a deadline extension for a bond repayment of 3.9 billion yuan (approximately 480 million francs) a few days ago, pushing it back to 2026. Any default would send shockwaves through the markets and further plunge an already struggling real estate sector in China, impacted by the health crisis and economic slowdown.
Country Garden had a considerable debt estimated at 1,430 billion yuan (180 billion euros) at the end of 2022. It had 147.9 billion yuan (18.6 billion euros) in cash reserves at the end of June, primarily intended to complete homes that had already been paid for by owners even before their construction.
Real estate groups in China have long relied on this financing model. However, their massive debt has been perceived in recent years by the government as a major risk to the country’s economy and financial system. As a result, Beijing has gradually tightened their access to credit since 2020, drying up the sources of financing for already indebted groups. A wave of payment defaults has followed, including that of Evergrande group, which undermines potential buyers’ confidence and has repercussions on the entire sector, amid economic slowdown.
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