China’s Largest Real Estate Developer Country Garden Sees Profits Plunging 96% | chinese economy

China’s largest property developer, Country Garden Holdings, reported a 96% drop in profit, blaming a “serious depression” in the crisis-hit country’s property market in which “only the fittest can survive.” .

The Hong Kong-listed company said preliminary net profit collapsed from 15 billion yuan ($2 billion) to 612 million yuan ($88 million) in the first six months of the year thanks to the crisis. of the real estate market that is slowly sinking the Chinese economy. .

Country Garden, which has thousands of real estate projects and a presence in almost 300 municipalities, has seen its shares fall more than 70% this year and shares fell another 2.3% on Tuesday to settle at HK$2.54.

It had previously warned that profits could fall as much as 70% and the even bigger-than-expected drop came with a grim warning in a statement to the Hong Kong stock market.

“In 2022, the real estate sector faced myriad challenges, including weakening market expectations, sluggish demand and a drop in property prices,” the company said.

“All of this is putting increasing pressure on all participants in the real estate market, which has rapidly slipped into a severe depression. The harsh business environment in which only the fittest can survive means even higher requirements for the competitive strength of companies.”

China’s real estate crisis began to rear its head nearly a year ago when second-largest developer Evergrande said it may not be able to meet payments on the offshore dollar-denominated part of its massive $300k mountain of debt. millions.

At the time, market observers believed that companies like Country Garden, which did not have such high loans, would not be affected by the problems.

But debt contagion has spread from Evergrande to the entire $60 trillion Chinese real estate market, causing a 40% drop in sales, falling prices and a mortgage strike by angry homeowners. the lack of completion of the houses that had been paid in advance.

The gloomy outlook has been compounded by the zero-Covid lockdowns that have strangled economic activity across China in the past 12 months, with Country Garden also blaming recent extreme weather for upsetting earnings.

The company’s troubles have also caused its majority shareholder, Yang Huiyan, daughter of the founder, to lose half of her $24 billion fortune.

However, the company still managed to strike an upbeat note, saying there was hope of a rebound in fortunes because the urbanization of the town was still progressing.

“China’s economy has proven resilient and its strong foundations for long-term development remain intact,” ti said. “The country’s new type of urbanization still has a long way to go, and the desire for a good life will always remain in people’s hearts. The real estate industry will always exist.”

“We will persevere and remain hopeful despite adversity. Country Garden keeps its feet on the ground as it works hard to get through a harsh winter and anticipates the arrival of spring.”

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