China’s top property developer expects to record a loss in 2022 – its first since the company went public in 2007 – in another blow for the country’s embattled property sector.
In a filing to the Hong Kong stock exchange, Country Garden said that the losses for 2022 would amount to between 5.5bn yuan and 7.5bn yuan (£663.6m-£904.9m). In 2021 Country Garden’s profits reached 26.8bn yuan.
Country Garden blamed the downturn on the Covid-19 pandemic, unfavourable currency exchanges and the reorganisation of certain projects. It said that these problems were “mainly in non-cash nature” and that it remained confident about its performance in 2023.
Last year government regulations aimed at reining in speculation in the property sector, including limits on borrowing, caused a cash crunch for developers. As real estate companies ran out of money and harsh zero-Covid lockdowns prevented workers from leaving their homes, construction stalled on hundreds of housing projects. The crisis severely dented confidence in the sector, with homebuyers in 24 provinces participating in mortgage boycotts to protest against unfinished projects.
Annual sales for the top 100 real estate companies declined by 41% in 2022 and more than 70 companies have issued profit warnings.
On Monday, Li Qiang, China’s new premier, gave his first public address in the role. He sought to boost confidence in China’s economy and said: “The environment for the private economy would get better and better.”
At this year’s National People’s Congress, China’s annual parliamentary session, the president, Xi Jinping, oversaw an overhaul of government agencies, particularly financial regulators, aimed at giving the party more oversight and control. The government wants to reduce risk in its economy as it aims for a relatively modest GDP target of 5%, up from its 3% performance in 2022.
Restoring confidence in the property sector, which typically accounts for about a quarter of GDP, will be key to China’s economic recovery. Anne Stevenson-Yang, a China economics and business analyst, said: “The government is terrified to allow developers to just go bust and give away their assets to households, which is what should happen.
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“Country Garden should have been bust a while ago,” she said, noting that most of the company’s portfolio consisted of unfinished properties with unrealistic valuations.