The ballooning debt crisis could delay the prospect of a recovery of both the property market and the broader Chinese economy, in which real estate is a core pillar.

Country Garden, once considered to be financially sound and stable, failed to pay the interest on two of its bonds due in August and narrowly avoided default by making the interest payment hours before a 30-day grace period ended on September 5.

It also failed to pay an interest of $15 million on a bond that was due in September but was granted a 30-day grace period.

Country Garden’s liabilities of 1.54 trillion yuan were the highest among the top-25 real-estate companies in China, and it was among seven to have reported a loss.

Eoin Treacy's view

China Evergrande finally stopped trading today. That’s more than two years since the initial signs of trouble arose. Meanwhile Country Garden is trending lower with no real evidence a viable rescue package is about to be provided. That’s not good news for foreign investors in the company’s bonds.

This graphic helps to highlight how many companies are close to running losses and the clear dominance of state-owned companies among those with the greatest liabilities but also profits.

Given the direction of policy in China, it is reasonable to expect private property development will be excised from the market over coming years, with state-owned companies acquiring what remains of their assets.

When India’s housing development finance companies went through a similar deleveraging process five years ago, the private developers and privately owned banks were eviscerated. The state-owned segment was preserved. I believe there is a strong likelihood China is going to follow a similar strategy.


China Vanke is by far the largest state-owned property developer. It remains in a consistent downtrend. That suggests there is no support from my view the company will be preserved from bankruptcy. A clear and sustained move above the 200-day MA will be required to confirm a return to demand dominance.