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China’s Country Garden Holdings received a liquidation petition from one of its creditors, Ever Credit Limited, intensifying concerns surrounding the country’s troubled property sector. The petition, dated February 27, cited non-payment of a loan totaling 1.6 billion Hong Kong dollars ($204.4 million).
In response, Country Garden announced its intention to vigorously oppose the petition and pursue legal measures, with a court hearing scheduled for May 17. The news sent shockwaves through the market, with the company’s Hong Kong-listed shares plummeting more than 12%, contrasting sharply with the broader Hang Seng index’s marginal decline.
Despite the setback, Country Garden affirmed its commitment to engage with offshore creditors and collaborate on its restructuring plan. The company expressed confidence that the petition would not significantly impact its ongoing offshore restructuring efforts.
The development comes amidst ongoing efforts by Chinese authorities to restore confidence in the real estate market, which has been grappling with challenges. A recent report by the International Monetary Fund projected a significant decline of approximately 50% in demand for new housing in China over the next decade.
This news follows the liquidation order issued to property giant China Evergrande by a Hong Kong court in late January. While concerns initially swirled about potential spillover effects, subsequent developments have suggested containment of Evergrande’s issues.
China’s property sector, historically a pillar of the economy, has faced mounting pressure due to heavy debt burdens accumulated during rapid expansion. Companies like Country Garden and Evergrande have struggled to meet their debt obligations, leading to prolonged debt restructuring processes and increasing uncertainty in the market.