News from China: the Country Garden Story

Country Garden, a Chinese property development company, has now defaulted on its bonds.

This is one of the manifestations of a sudden slow-down in China's property sector, one of the country's key sources of wealth creation. The total sales of China's largest 100 property developers were down 29% in September of this year from the same number in September 2022. [That year-on-year figure comes from the China Real Estate Information Corp., a private data provider.]

Until a year ago, Country Garden was considered a model developer by the Chinese state authorities. It was credit worthy in the eyes of state-owned banks and investment worthy in the eyes of those from whom it raised money on the Hong Kong exchange in late 2022.

But between the beginning of 2023 and the default in mid-October, the HK listed shares had lost 72 percent of their value.

Where is the property development sector in the country headed? What impact will that have on China's macro picture? These are very good questions. Very good questions indeed.

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