The situation with China’s property market is causing a lot of global economic stress. Recent studies show that it’s now seen as a major credit threat worldwide. The issues with Evergrande in 2021 were somewhat expected, but what came as a shock was the trouble faced by Country Garden, which was usually seen as a stable player in the real estate scene.
A recent poll from Bank of America showed that twice as many people, now 33%, are concerned about China’s real estate situation compared to the previous month. When Evergrande, a big real estate company in China, couldn’t pay its debt, it wasn’t really a surprise since they’ve been struggling for years.
But this year, another real estate giant, Country Garden, has been having problems because there are too many houses and not enough buyers, which was part of what was driving the market up. Based on a report from Reuters, Country Garden is struggling with cash. They barely managed to pay interest on a bond worth $500 million due in 2025 earlier this month. In August, they couldn’t make payments of $22.5 million on two bonds on time, but did manage to pay them before the deadline.
China’s government has tried to help the property market, which led to a short boost in buying and selling. However, Bloomberg reports that this increased activity is now slowing down.
This government support had the most effect in Beijing, but it didn’t last. According to a top property agency in China, the number of pre-owned homes being sold in the city fell by 35% in just a week. New homes being sold also went down. Moody’s has become pessimistic about the property market and believes sales will drop by 5% in the next half to full year, partly because of the problems at Country Garden.
At the same time, there are warning signs in China’s economy. Big cities are seeing lower wages, especially in Beijing and Shanghai. Their tech industry is struggling, fewer people are being hired, and young people are finding it harder to get jobs, all pointing to economic troubles.
China’s economy is slowing down due to problems in the property market, a drop in exports, and people not spending as much. The government hoped for about 5% economic growth this year, but experts think it’ll be less, especially since the government doesn’t want to borrow a lot of money to boost the economy like they did in the past.