The debt crisis at Country Garden , China's largest property developer before this year and once considered a financially sound company, has triggered fresh contagion fears just two years after China Evergrande Group defaulted.
Since the sector's debt crisis unfolded in mid-2021, companies accounting for 40% of Chinese home sales have defaulted, most of them private property developers.
With home sales already very weak, the debt crisis could delay the prospect of a recovery of both the property market and the broader Chinese economy, in which real estate is a core pillar. Local government could tighten more the escrow accounts where presale funds are kept in order to ensure homes can be completed and delivered - a top priority set by Beijing.
Workers walk past a construction site of residential buildings by property developer Country Garden in Kunming, Yunnan province, China September 17, 2019. REUTERS/Wong Campion/File PhotoEvergrande was already insolvent at the time of default, but Country Garden currently still has more assets than liabilities. Analysts warn that Country Garden could become insolvent if it had to write off large inventories, and run into negative equity if its asset values dropped over time.
China's property sector accounts for more than half of global new home sales and home building, and it is the largest asset class in the world, with an estimated market value of around $62 trillion.
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