World Trade

Country Garden Pays Off Dollar Debts, Offering a Ray of Hope for China’s Real Estate World

In the hearts of Hong Kong and Beijing, whispers filled the air. Country Garden, just in the nick of time, paid up its U.S. dollar debts. And guess what? It was just a few hours shy of their grace period deadline. Talk about a buzzer-beater! It’s like catching a breath when you’re seconds from drowning, especially since this was their second save from a potential default in less than a week. Phew! That sure brought a much-needed sigh of relief to China’s already shaky property scene.

Now, here’s the tea. Earlier on, this massive Chinese property giant kinda slipped up. Yep, they missed their bond payments, a cool $22.5 million, that was due back on August 6. This blip sent shivers down the market’s spine, making everyone super antsy for nearly a month. Even though it might sound like small beans, not paying up could’ve tossed a huge wet blanket on hopes that China’s little financial boosters were actually helping patch up the economy and the wobbly property market.

But that’s not all. If they had dropped the ball here, it would’ve been like opening Pandora’s box. More defaults, more frantic calls for quicker paybacks, and heaps of nervous jitters about China’s economy going off the rails.

Tuesday spilled more beans. Country Garden, looking for a breather, offered a deal to push back payments for some bonds (worth a whopping 10.8 billion yuan or about $1.48 billion) by three whole years. Can you believe it? Those in the know, and some pretty sneaky documents, confirmed these bonds were all set to be paid off in the next couple of years.

When the folks at Country Garden were nudged for a chit-chat, they zipped their lips. Those who spilled the deets? They’re keeping on the down-low, probably because they weren’t supposed to be gossiping in the first place.

Gary Ng, a big-shot economist from Natixis Asia Pacific, chimed in, “Country Garden is busting its chops trying to settle its debts. Whether they keep this up hinges on if this latest economic pick-me-up works its magic.”

Word on the street is, China’s been sprinkling some financial fairy dust lately. They’ve dialed down mortgage rates and dished out some sweet deals for first-time home buyers in the big cities. Gary thinks this might prop up the housing scene and give people a bit more pep in their step. Still, there’s a long way to go before the money flow gets its groove back.

Country Garden’s money pickle shines a spotlight on the thin ice China’s real estate is skating on. It’s a huge piece of the economic pie, and, let’s be real, things have been going south ever since China said “No more!” to high debt in 2021. Add a lukewarm bounce back from the pandemic, and you’ve got a cocktail of concerns.

Susannah Streeter, a U.K. finance whiz, painted the picture perfectly: “With folks in China not splurging as much, and house prices taking a nosedive in some cities, everyone’s biting their nails about the property sector’s next move.”

And here’s the cherry on top. After news broke about Country Garden making those payments, their dollar bond prices got a teeny boost. But, let’s not throw a party just yet. The prices are still in the pits. The company’s stocks? Well, they dipped about 1%. And some other bigwig property indices in China took a hit of over 2%.

In a plot twist, just last Friday, Country Garden got a thumbs up to stretch the payback time for another bond, valued at 3.9 billion yuan ($536 million). Despite the rollercoaster, they’ve managed to stay on top of their game, always paying their debts. Yet, with a whopping $162 million in bond payments lurking around the corner, everyone’s crossing their fingers and hoping they can keep the streak alive.

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