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HONG KONG (Reuters) -China's Country Garden Holdings said it might not be able to meet all of its offshore payment obligations when due or within the relevant grace periods, as the country's largest private property developer grapples with debt restructuring. "Such non-payment may lead to relevant creditors of the Group demanding acceleration of payment of the relevant indebtedness owed to them or pursuing enforcement action," the company said in a Hong Kong Stock Exchange filing on Tuesday. Companies accounting for 40% of Chinese home sales - mostly private property developers - have defaulted on debt obligations since a liquidity crisis hit the sector in 2021, leaving many homes unfinished.
As developer China Evergrande Group lurched from one crisis to another over the past two years, Beijing avoided directly intervening to rescue what was not too long ago considered one of the country's "too big to fail" enterprises. With the world's most indebted developer now standing at the precipice after authorities launched a criminal investigation into its billionaire founder, some creditors, investors and analysts are now betting on authorities stepping in to manage the fallout. A messy collapse of the property giant could rip through the already-sputtering economy, with hundreds of thousands of unfinished homes across the country and roughly $300 billion worth of liabilities at home in China alone.
Yet, the strain from interest rate hikes has just started to come through and with central banks signalling that rates will likely stay higher for longer, the notion of something "breaking" remains strong. Nowhere is the impact of higher rates being felt more acutely than in real estate, still reeling from COVID-19. Sweden is the hardest hit in Europe since much of its property debt is short-term, making it a harbinger for the region.