China’s real estate market slips into deep recession
China’s real estate market is struggling.
The Wall Street Journal reported that Country Garden Holdings, ranked for years as China’s top real estate developer by contract sales, posted a 96 percent drop in first-half profit. The company’s home sales were down a third from the previous year.
The Guangdong-based company told outlets that anemic demand, low expectations and low property values contributed to the market faltering. “All this is putting increasing pressure on all participants in the real estate market, which has quickly slipped into a severe depression.”
The resurgence of Covid-19 in cities across China has slowed construction on projects due to the strict lockdown.
Country Garden, which is considered one of the most powerful financial developers in the country, made a profit of $89 million during the first six months of 2022. This is far less than the $2.2 billion it made during the same time period in 2021.
More than 30 Chinese real estate companies, including China Evergrande Group and Sunac China Holdings, have defaulted on their international debts and private developers have issued profit warnings.
The deteriorating real estate market is also affecting other Chinese sectors such as private banks and state-owned asset managers.
Debt managers China Cinda Asset Management and China Huarong Asset Management reported losses during the first half of the year. Cinda posted a 33 percent drop in profits, and Huarong posted a net loss of $2.7 billion.
Country Garden Chairman Mo Bin apologized to investors for the sharp drop in earnings during the earnings call and said the company will continue to adjust its strategies to focus on cash flow balancing.
The company also suggested that despite the recession, it believes that China’s economy is resilient and that the country’s urbanization has put it in a position to grow in the long term.
– Victoria Pruitt