In a significant turn of events for China’s beleaguered property sector, Country Garden, a major player in the industry, experienced a notable surge of over 17 percent in its shares on Thursday. The surge follows emerging signals from Chinese officials indicating forthcoming concrete support for the troubled property market.
SHANGHAI: Country Garden, one of the largest entities in China’s property industry, had accumulated substantial debts, estimated at 1.36 trillion yuan ($191 billion) in June. The company finds itself entangled in a broader sectoral crisis, joining the ranks of other debt-laden developers, such as Evergrande, which have either defaulted or are at the brink, causing concerns about potential repercussions on the broader economy.
According to reports from Bloomberg News on Wednesday, Country Garden, listed in Hong Kong, is purportedly on a draft list of 50 developers eligible for additional financial support, as revealed by sources familiar with the matter. This list, compiled by regulators, encompasses both private and state-owned developers and serves as a guideline for banks contemplating various mechanisms to support these companies.
In response to these developments, Sino-Ocean Group, another company reportedly on the list, experienced a surge of more than 30 percent in Hong Kong. Other developers, including China Evergrande (up almost six percent) and Kaisa Group (up more than seven percent), also witnessed positive market movements.
As the debt crisis in the property sector continues to escalate, authorities are on high alert, fearing its impact on buyer confidence, housing prices, and the potential spillover into other sectors within an already sluggish economy. Construction and real estate contribute to approximately a quarter of China’s gross domestic product.
In a clear indication of the government’s commitment to supporting the sector, China’s parliament released a report on Wednesday, urging banks to play a more substantial role in aiding the industry. The document, arising from a meeting last month with the head of the People’s Bank of China, calls for increased support for developers to ensure the “guaranteed delivery of buildings.”
Acknowledging the potential risks and challenges, the report also emphasizes the need for financial institutions to “support the reasonable financing needs of real estate companies, reduce the risk of credit defaults, and alleviate the fears of residents purchasing long-term housing.” This move is seen as part of a broader strategy to stabilize the property market and mitigate the broader economic fallout.