China's Country Garden Holdings Faces Liquidation Petition Amid Property Sector Worries

China's Country Garden Holdings Faces Liquidation Petition

Country Garden Holdings, a troubled property developer in China, revealed that it has received a "winding-up" petition from creditor Ever Credit Limited. The petition, dated Feb. 27, was filed due to the non-payment of a loan amounting to 1.6 billion Hong Kong dollars ($204.4 million).

Opposition and Legal Measures

Country Garden intends to vehemently oppose the liquidation petition and plans to take legal measures to do so. A court hearing is scheduled for May 17.

Market Reaction

Following this development, the Hong Kong-listed shares of Country Garden witnessed a significant drop of over 12%, in stark contrast to the 0.27% decline in the broader Hang Seng index.

Restructuring Efforts

The company stated that it aims to proactively engage with its offshore creditors and collaborate on its restructuring plan. It also expressed the belief that the petition will not substantially affect its offshore restructuring process.

Real Estate Market and Concerns

This news emerges at a time when the Chinese authorities are grappling with the need to bolster confidence in the real estate market. The International Monetary Fund has projected a 50% decrease in the demand for new housing in China over the next decade.

Historical Context and Industry Impact

China's property sector has historically been a cornerstone of the country's economy, contributing significantly to its gross domestic product. However, the industry's rapid growth, fueled by debt, has resulted in substantial debt burdens and defaults for major developers such as Country Garden and Evergrande.

Challenges and Struggles

These companies have encountered difficulties in repaying their debts and are currently embroiled in prolonged debt restructuring processes. In this context, the liquidation petition against Country Garden further underscores the challenges faced by the beleaguered property sector in China.