Chinese Developer Country Garden Faces Construction Halts and Debt Crisis in Tianjin

Construction of an unfinished residential complex run by Country Garden, China’s largest real estate developer, has slowed down dramatically in the northern Chinese city of Tianjin, and worries are mounting among workers who haven’t been paid since Chinese New Year in January. The corporation is currently experiencing a larger debt crisis, which has the potential to have an effect on the overall economy.

The Yunhe Shangyuan apartment complex is one of two Tianjin developments that Reuters saw. Workers on both projects reported months of unpaid wages and partial or complete construction halts under Country Garden’s administration. On the larger site, there are incomplete five-story residential buildings, while on the other, there are skeletal high-rises with idle cranes and scaffolding.

Country Garden was formerly a financially sound developer, but its current troubles are a reflection of how developers’ fortunes have changed in China’s real estate market. The difficulties the corporation is facing are causing a wider financial problem in the industry, which accounts for nearly a fourth of China’s economy. A decline in the property market and a decline in consumer expenditure have further exacerbated the crisis.

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Even while a spokesman from Country Garden’s Yunhe Shangyuan project insisted that only “registered employees” were getting paid, some workers are actually hired in some capacity by Shenyang Tengyue Construction, the developer’s contractor. According to reports, the contractor has agreed to pay the workers’ salary by the end of the month.

According to estimates from the Japanese investment bank Nomura, Country Garden is burdened by roughly one million unfinished dwellings. The company informed investors in an exchange filing that it is dedicated to providing residences and maintaining nationwide project operations, despite the fact that it has not officially verified halts because of financial restrictions.

The foundation of Country Garden’s original success was the sale of a large number of units at low margins while providing “five-star living” in less well-known locations. The company has about a dozen projects in Tianjin alone, some of which are experiencing development delays as a result of the relationship between building speed and sales rate. As developers struggled with liquidity and COVID-19 regulations last year, the confidence in China’s real estate market began to wane, which resulted in a decrease in transaction volumes. Although the housing market started to pick up in early 2023, many of them are still weak because of the income restrictions on homeowners.

Country Garden’s debt crisis acts as a barometer for the larger difficulties encountered by developers in China’s real estate industry as the company tries to navigate it. Market watchers will keep a close eye on the company’s efforts to resolve its financial issues and fulfill its obligations to homeowners.