Country Garden Struggles Amid Liquidity Crisis

Country Garden (HK:2007) Holdings Co., a major Chinese property developer, is facing increasing liquidity issues as its sales fell in November, indicating further distress in China's real estate sector.

The company reported a 52.3% decrease in contracted sales for November compared to the same month last year, totaling 3.01 billion yuan ($414 million). This is a stark decline from the 31% sales drop observed in October, according to corporate filings.

Despite the Chinese government's recent attempts to revive the housing market through measures such as reduced borrowing costs on existing mortgages, eased purchasing restrictions in major cities, and lowered taxes on home transactions, the residential market has not maintained its brief recovery period.

Broader economic challenges, including deflationary pressures, have contributed to ongoing declines in property sales.

Country Garden's sales have declined more significantly than those of its competitors, which is partly due to the company's strategic focus on lower-tier cities and migrant workers in prior years.

In contrast, the 100 largest real estate firms in China have seen a relatively modest average decline of 6.9% in home sales, as tracked by China Real Estate Information Corp.

The Foshan-based developer's financial difficulties are escalating. In February, a creditor filed a petition against Country Garden after the company defaulted on dollar-denominated debt a year earlier. Currently, Country Garden is negotiating with creditors to restructure its debt.

However, the company has missed its own deadline for securing crucial creditor support for its restructuring plan, as reported last month.

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