Is China’s property crisis at breaking point? Country Garden heads for debt workout while Sino-Ocean misses payments

Country Garden’s shares slip to a historical low after the company suspends trading of at least 10 onshore bonds

Sino-Ocean said it suspended trading of 6 per cent guaranteed notes due 2024 because of non-payment of US$20.94 million in interest

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A person sits near a construction site of residential buildings by Chinese developer Country Garden in Beijing on August 11, 2023. Photo: Reuters

Published: 11:28am, 14 Aug 2023Updated: 10:14pm, 14 Aug 2023

China’s property crisis faces a reckoning as two of the country’s best-known developers find themselves under the spotlight for their debt woes.

Shares of Country Garden Holdings slumped to record lows after the company halted trading of almost a dozen onshore bonds, while state-backed developer Sino-Ocean conceded that it missed US$20.94 million in interest payments. The financial troubles reinforced fears that a hoped-for recovery in the struggling property sector – once an engine of China’s economic growth – might prove to be a mirage.

“The suspension of onshore bonds by Country Garden implies a potential restructuring,” said Raymond Cheng, managing director of CGS-CIMB Securities. “Probably they suspended trading in case any sensitive or inside information might be disclosed, which would add to market speculation and thus impact on any restructuring.”

China’s beleaguered developers have posted anaemic business in the past month, with contracted sales by the top 100 developers slumping 33.1 per cent in July to 350.43 billion yuan (US$48.4 billion), according to property consultancy CRIC. Still, the contagion is not comparable to the 2021 crisis faced by China Evergrande Group, because 40 per cent of the market has already defaulted since then, JPMorgan said in an August 9 report.

Residential buildings developed by Country Garden Holdings in Baoding of Hebei province on Tuesday, Aug. 1, 2023. Photo: Bloomberg.

After Country Garden missed bond coupon payments worth US$22.5 million last week, raising the risk of default if it cannot make the repayment within a 30-day grace-period, the once largest Chinese developer said it is facing the “biggest challenges since establishment” in a statement on Friday night.

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