China’s debt-laden developer Country Garden, whose financial crisis sent shockwaves to Chinese and global markets, has seen work at some sites grind to a halt and workers not paid for months.
“They haven’t paid us since Chinese New Year (in January). We are all worried,” a labourer surnamed Wang said. The 50-year-old said he had stopped work at the developer’s Yunhe Shangyuan site in the northern Chinese metropolis of Tianjin last week.
Facing $192 billion worth of debt, Country Garden is saddled with nearly 1 million unfinished homes in 3,121 projects spread across all of China’s provinces, according to estimates by Japanese investment bank Nomura. The developer was China’s largest developer by sales volume before this year.
In comparison, China Evergrande, whose debt default triggered the country’s property crisis in late 2021, has just around 800 unfinished projects. The world’s most heavily indebted property developer, Evergrande filed bankruptcy claims in a US court last week.
This has now made Country Garden a bellwether of how the cycle has turned for Chinese developers, and halted construction, along with unpaid wages, only adds to uncertainty around the property giant’s fate.
The country is estimated to have more than 50 million unsold or empty apartments.
Workers at dorms on two Country Garden sites in Tianjin, a port city of 14 million people about 135 km (84 miles) southeast of Beijing, complained of months without pay.
“I’m under a lot of pressure,” said a worker surnamed Wei, at the sprawling Yunhe Shangyuan site. Also in his 50s, Wei added he had only received a one-off living stipend of 4,500 yuan ($618) so far this year.
“I have a wife and kid who’s about to return to school, as well as elderly parents … Workers can’t live on this.”
At another similar site — Yunjing Huating — the local government in June ordered construction to be suspended to fix management problems, a project representative said.
Construction had partially or fully stopped at both sites – the larger one with a few rows of unfinished five-storey apartment blocks and the other with lifeless cranes and thick green scaffolding hanging over skeletal high-rises.
A representative of Country Garden’s Yunhe Shangyuan project said in a WeChat statement its “registered employees” were all being paid.
The Yunjing Huating site, meanwhile, has now passed inspection and work is expected to resume next week, the project representative said, adding the suspension had no impact on the targeted completion date of October 2024.
Some workers are not employed directly by the developer, the Yunjing Huating representative said, but by its contractor, which “has promised to pay the workers’ wages by the end of this month”.
The project contractor, Shenyang Tengyue Construction, did not pick up calls or respond to emails seeking comment.
Country Garden has not publicly acknowledged whether any of its projects have halted construction due to financial constraints.
In an exchange filing on August 10, Country Garden said it would “spare no effort to ensure delivery” of apartments and that it would “ensure the operation of projects nationwide” to fulfill its commitment to home buyers.
Once considered one of the more financially sound developers, Country Garden built its success by quickly selling a large number of units for low margins and by promising “five-star living” in less popular, smaller cities.
Tianjin has about a dozen Country Garden projects, with the majority finished and delivered, Gao Fei, investment advisory manager at the Tianjin branch of Centaline Property Agency, said.
Gao said halted construction projects were “relatively rare” in the city, representing about a dozen out of 300 sites for sale, but “there are indeed projects whose development progress has slowed down”.
“In China, it is a common phenomenon because now all developers control the rhythm of construction based on the sales rate … so once sales slow down, so will construction,” Gao said.
Confidence in the sector took a big hit last year after many Chinese homebuyers threatened to stop repaying mortgages, as developers stopped building pre-sold housing projects due to strapped liquidity and strict Covid-19 restrictions.
China’s real estate market slightly rebounded in the first quarter of 2023 but transaction volumes have since declined, with the majority of city housing markets remaining in a “depressed” state, Gao said.
“We have seen that many homebuyers are affected by a lack of income, and their home-buying choices and what they can afford have been impacted in turn.”
Country Garden’s financial woes have added to the debt crisis in China’s real estate sector, which accounts for roughly a quarter of the world’s second-largest economy.
The economy is currently losing steam, with growth prospects dimming amid a housing slump and weak consumer spending.
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