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Yang Huiyan, majority shareholder of Country Garden, one of China’s largest real estate groups, has seen his wealth halved in just one year. A change of fortune that illustrates the difficulties of a Chinese market that is now closely watched by the authorities in Beijing. Explanations.
She is still the richest woman in Asia but with half the fortune. In just one year, Yang Huiyan’s fortune grew from $23.7 billion to $11.3 billion, according to Bloomberg’s Billionaire Ranking released this week. A vertiginous fall that once again illustrates the weakness of China’s real estate market.
A brilliant heir, Yang Huiyan is the majority shareholder of Country Garden, a company created by his father in the early 1990s, which has become one of the most important promoters in China.
The company achieved the largest turnover in the sector last year despite a real estate crisis symbolized by the Evergrande group, the former number 1, weighed by an abyssal slate of 300 billion dollars. .
Far from being bad, Country Garden is however heavily indebted, like most of China’s real estate giants. However, since 2020, Beijing has pushed for the end of the recession: the conditions for accessing bank credit for promoters have become more stringent. Objective: to prevent the collapse of the sector, which could potentially harm the entire Chinese economy.
Victim of market turmoil
In order to meet its payment deadlines and launch new investments, Country Garden has chosen to sell, Wednesday, July 27, new shares to increase its liquidity.
“However, this sale of shares is interpreted as a sign of weakness in a sector with a lot of difficulty that represents a significant weight of China’s GDP. Therefore the financial markets are very nervous”, analysis of the economist Mary-Françoise Renard, author of “China in the global economy” (ed. Blaise Pascal University Press).
As a result, Country Garden’s shares lost 15% of their value on the Hong Kong Stock Exchange, effectively causing a severe blow to Yang Huiyan’s portfolio.
“It is necessary to tighten the conditions of access to credit, but in the short and medium term it increases the difficulties of these companies, which find it difficult to finance themselves,” explained Mary-Françoise Renard. “A few years ago, Country Garden could borrow from the banks without a problem.”
Cascading payment defaults
If Country Garden was able to raise funds in the face of a fall in its share price, other major players are far from having such a strong back and find themselves, like Evergrande, in inability to repay a maturing loan.
At the beginning of July, the Shimao group, which recorded a 72% decrease in sales within a year in the first five months of the year, had to stop paying debts worth more than one billion dollars. In May, the Sunac group found itself without money and announced a payment default.
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For two decades, the real estate sector has benefited from the continuous rise in the standard of living of the population of a country where the purchase of a property is often a requirement for marriage. But this bulimia of purchases ended up drying up in the 2010s.
The uncertainty linked to the Covid-19 crisis has also contributed to dampening the enthusiasm of potential buyers. Beijing’s “zero Covid” strategy “burdens household consumption. In general, it is very expensive for the whole economy”, says Mary-Françoise Renard.
Added to these difficulties is the beginning of a crisis of confidence: several hundred groups of Chinese owners who bought apartments in the plan decided not to pay their debts. A way to put pressure on developers when the construction of a property is interrupted.
Despite the authorities controlling the sector, the structural problems persist and are not about to disappear, believes Mary-Françoise Renard, who mentions the “huge debt of promoters, risky investments and above all a bad risk assessment from banks and local governments.
According to some analysts, the real estate sector may still fall into a vicious circle that could increase consumer confidence while China’s growth stalls. According to official figures published in July, the gross domestic product of the world’s second largest economy grew in the second quarter by only 0.4% over a year.