Panic has spread across Chinese households during the last week. Country Garden, the business responsible for construction of the apartments, failed to pay $22.5 million in coupons on August 6. One of the biggest homebuilders in the world now has until early September to complete the payments or go into default and restructuring with hundreds of other developers. Their bonds are worthless, hence trading in them was suspended on August 14th.
All eyes in government are on this. Country Garden is well-known for its massive construction projects in China’s Tier 2 and Tier 3 metropolises. Compared to the large and deeply indebted Evergrande, which went bankrupt in 2021, the company’s obligations are manageable. Before Evergrande went bankrupt, Country Garden was constructing four times as many houses as Evergrande. There will be at least 144,000 customers who do not get the houses they were promised by the end of 2022 if Country Garden continues to deliver them at the pace they were in the first half of 2022. A sudden financial collapse at the company would put many more people out of work.