Asian markets fell after concerns over the health of China’s second largest economy were raised by problems at China’s biggest private property developer.
Country Garden shares fell by over 18% on Monday, after the developer missed an important debt payment and suspended the trading of several of its bonds.
At the end of 2022, the property giant’s total liabilities were $194bn (£117.5bn). It is among the 500 largest companies worldwide.
The default of Evergrande, China’s second largest developer in 2021, would be dwarfed by the potential failure of Evergrande.
Country Garden faces default if they cannot pay the interest on their bonds by September.
Yang Huiyan said that the company is “facing its greatest challenges since its establishment”.
Evergrande is currently attempting to complete China’s largest debt restructuring, after revealing losses of more than 81bn dollars following its default on debts almost two years ago.
Evergrande will collapse at the end 2021 due to its failure to pay over $300bn in debt.
Dalian Wanda, a property conglomerate, narrowly avoided defaulting on a $400m bond last month after scrambling to pay at the last moment.
After Beijing imposed borrowing limits on developers in the past few years, Beijing’s Country Garden fiasco will increase concerns about China’s construction industry.
Jennifer McKeown is the chief global economist of Capital Economics. She said that Country Garden’s problems will undermine confidence in homebuyers and creditors, which could worsen the economic downturn and the weakness of the sector more broadly. They could also encourage more policy support.”
Fresh data on Chinese economic activities will be released on Tuesday. These include retail sales and industrial output for July.
On Monday, the offshore yuan dropped as much as 0.5pc versus the dollar. It is now close to its 2023 lows. Hong Kong’s Hang Seng Index fell 1.6pc, and the Shanghai Composite Index dropped 0.3pc.