Why this company's financial crisis threatens China's economy

economictimes.indiatimes.com:

The privately owned developer, founded by a farmer three decades ago, is inching closer to default. In China's housing market, there are plenty of deadbeat developers no longer paying their bills. The possible collapse of Country Garden is one to pay attention to.

The company has tried to project confidence. «One shall pick himself up from where he has fallen,» Mo Bin, Country Garden's president, said last week, pledging to «spare no effort.» But the problem is much bigger than one company, and the timing could hardly be worse. A default by Country Garden would be the latest in a string of collapses in a housing market that has been hurting for years.

Emerging from paralyzing lockdowns during the pandemic, China's leaders badly need the country's economic engine to pick up. Instead, growth is sputtering as housing prices fall, people spend less, and consumer and business confidence wanes. Now experts fear that Country Garden's troubles will spill over into the broader financial markets, thwarting any possible recovery of the real estate industry and spreading the damage through the economy.How did Country Garden run into trouble? A year ago, Country Garden was a model corporate citizen in an expanding universe of delinquent real estate companies that borrowed recklessly and then stopped paying their bills.

Country Garden, founded by Yang Guoqiang in 1992, was a beneficiary of the world's biggest real estate boom. Its success turned Yang into a billionaire and became a testament to the country's remarkable growth. Chinese people, having few other reliable options to build wealth, invested their incomes and savings in real estate.