MercoPress. South Atlantic News Agency

China's largest property developers on thin ice: 'Country Garden' admits losses of US$ 7,6bn in six months

Shares in Country Garden Holdings were down by almost 10% in Hong Kong trade on Friday morning.

One of China's biggest property developers, Country Garden has warned that it could see a loss for the first six months of the year of up to US$7.6bn., the latest sign of the major issues faced by the world's second-largest economy.

This week official figures showed China had slipped into deflation for the first time in more than two years. Exports have also fallen sharply, while youth unemployment is at a record high.

Shares in Country Garden Holdings were down by almost 10% in Hong Kong trade on Friday morning.

Country Garden ”is expected to record a net loss ranging from approximately RMB45 billion (US$ 6.24bn.) to RMB55 billion for the six months ended 30 June 2023,“ the real estate company said in an announcement to the Hong Kong Stock Exchange.

The expected loss compares to a US$ 265m profit for the same time last year.

The firm also said it has set up a special task force, headed by its chairman Yang Huiyan, to find ways to turn the business around.

Earlier on Thursday, rating agency Moody's downgraded the company's rating, citing ”heightened liquidity and refinancing risks“. It came as China faced a number of economic challenges, which have raised questions about the pace of its post-pandemic recovery.

Earlier this week, official figures showed China's trade cooling, while youth unemployment, which is at a record high, is also being closely watched as a record 11.58 million university graduates are expected to enter the job market this year.

On Thursday, US President Joe Biden said China's growing economic issues make it a ”ticking time bomb.“

At a fundraising event in the western state of Utah, Mr Biden also said ”China is in trouble” as he highlighted its high unemployment and aging workforce.

The country is also tackling ballooning local government debt and challenges in the housing market.

Last month, Evergrande, which was once China's biggest real estate firm, revealed that in 2021 and 2022 it lost a combined US$ 81.1bn. It came as the firm, which defaulted on its debts in late-2021, reported its long overdue earnings to investors. Evergrande has been struggling with an estimated US$ 300bn of debts.