Debt-Saddled Country Garden Casts Shadow Over Beijing's Recovery Efforts

Chinese real estate giant Country Garden Holdings Co. Ltd. CTRYF is unable to meet offshore debt obligations.

The company was confronted with a looming deadline to make an interest payment of $15 million on Tuesday. This deadline arrived within a 30-day grace period after Country Garden missed the initial payment date on Sept. 18.

According to Reuters, the Tuesday deadline corresponds to midnight in New York, which aligns with noon on Wednesday in China, but the coupon payment has not been made.

Country Garden refrained from specifying the exact debt obligations it encountered difficulties with, including the $15 million interest payment. The firm intends to explore a comprehensive solution to address its debt crisis with the help of professional legal and financial advisors.

As of June, Country Garden had accumulated liabilities exceeding $180 billion. Its impending debt default could further complicate the already challenging situation in China’s distressed real estate sector, which constitutes about a fifth of the nation’s economy.

Country Garden’s dollar-denominated bond maturing in January 2024 has tumbled to as low as 4 cents on the dollar, reflecting minimal optimism among external creditors regarding repayment. Similarly, the external bond maturing in January 2031 has also experienced a sharp decline, reaching nearly four cents on the dollar.

Chart: Country Garden’s Dollar Bonds Tumble To 4 Cents On The Dollar

China Reports Positive Economic Data

The most recent economic data from China exceeded expectations and sparked optimism about an ongoing economic recovery.

During the third quarter of 2023, China’s GDP expanded by 4.9% year-on-year, surpassing market forecasts of 4.4% and raising hopes of achieving the official annual target of approximately 5% for the year.

Furthermore, China’s retail sales surged by 5.5% year-on-year in September 2023, marking a significant acceleration compared to the 4.6% gain in the previous month and exceeding market estimates of 4.9%. It represented the most substantial increase in retail sales since May.

Additionally, China’s surveyed urban unemployment rate dropped to 5.0% in September 2023 from 5.2% in August, marking the lowest jobless rate since November 2021.

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