Evergrande has filed for bankruptcy protection and firms covering 40% of Chinese home sales have defaulted
China’s property crisis has deepened with two major developers facing severe financial difficulties that threaten to send shock waves through the country’s economy and beyond.in New York on Thursday. The provision permits the company to protect its US assets and will allow cross-border bankruptcy proceedings as it undergoes a restructuring.
Country Garden is one of the few major homebuilders to have avoided default since Beijing introduced a “three red lines” policy in 2020 that was aimed at reining in the debt levels in the highly leveraged sector. The red lines set limits on liabilities-to-asset ratios and ensure companies hold cash reserves equivalent to at least 100% of short-term debt.
The turmoil in China’s property sector has left suppliers unpaid and homebuyers, who have often made hefty downpayments, without their apartments. Buyers in hundreds of cities have staged mortgage boycotts in protest at the unfinished developments. As confidence in the real estate sector has plummeted, so have home sales, depriving developers of much-needed cash to complete construction works and meet interest payments. New home sales for the top 100 property developers declined by 33% in July, compared with 2022, according to S&P Global Ratings, a ratings agency. Country Garden’s sales were down by 60%.
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