Chinese Real Estate Sector Under Pressure as Country Garden Suspends Shares on HKEX and Ever Credit Files Winding-Up Petition

In the midst of a crisis, Chinese property developer Country Garden has suspended trade in its shares on the Hong Kong Stock Exchange. The company announced that it needed more time to gather information as it works to restructure its debts. Last year, the company defaulted on its overseas debt and is currently facing a winding-up petition.

The first hearing for Country Garden’s winding-up petition, filed by Ever Credit Ltd, is set for May 17. Ever Credit is a subsidiary of Kingboard Holdings, a laminates maker and property investor. The share suspension coincided with the reopening of the Hong Kong stock market after the Easter weekend. Additionally, Chinese state-backed property developer China Vanke saw its shares plummet to a record low on Tuesday, reporting a profit decline of over 50% in its annual report and outlining plans to reduce debt over the next two years.

China’s real estate sector has been under immense pressure since 2021 when the government implemented policies to limit borrowing for major developers. Multiple large Chinese property developers, including Evergrande and Country Garden, have defaulted on their debts in recent years, significantly impacting the country’s economy given that the sector contributes about a third of its GDP. Beijing has introduced various measures to stimulate housing demand, with the financial markets regulator accusing Evergrande and its founder of inflating revenues by $78 billion in the two years leading up to the debt default. The company’s mainland subsidiary was fined, and Mr. Hui faces a potential lifetime ban from China’s financial markets.