The heavily indebted ChineseChinas real estate crisis Country Garden has announced that it is unlikely to be able to meet its foreign payment obligations on time. This could prompt creditors to demand early repayment of their loans or to take legal action. Country Garden, one of China’s largest construction groups, has accumulated debt of 1.43 trillion yuan (188.5 billion euros), which could have serious implications for the Chinese economy. In September, there was already a threat of default, but this was averted at the last minute. Now, outstanding loans of 470 million Hong Kong dollars (about 56 million euros) are at stake, with the company having 30 days to avoid default. However, Country Garden has already announced that it will likely be unable to meet its obligations.
Chinese real estate giant Evergrande has also been facing financial collapse for some time. A group of investors with more than $6 billion in Evergrande bonds is warning that the Chinese real estate giant is facing serious difficulties that could affect the country’s property market. Evergrande had canceled a planned $19 billion debt restructuring. Investors are pushing for a deal because failure could be catastrophic. They stress that Evergrande’s insolvency could affect other real estate companies. Investors are demanding an agreement with regulators and warning of liquidation on October 30, 2023 if a solution is not found. This could lead to high losses and make the restructuring of Chinese real estate companies more difficult overall.
The hazardous situation in China’s construction and real estate sectors, which make up a central part of the People’s Republic’s economy, is also having an impact on the stock market. For example, the Hang Seng Index reached its low for the year at 17128 HKD in early October. Since the high at the end of January at approx. 22710 HKD, a downward movement of almost 25% was thus recorded. Although the index has recovered almost 7% since the low on October 4, bear pressure remains high. A possible continuation of this upward movement could weaken at around 19000 HKD. Otherwise, should a downward movement come, investors should keep an eye on the 17000 HKD mark, which is above the next important support.
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