Country Garden’s subsidiary in Malaysia has adequate funds to service loans
The Bank Negara Malaysia (BNM), the country’s central bank, said on Monday that the domestic banks had limited exposure to China’s largest property developer, Country Garden, and faced low financial stability risk from it. The BNM was responding to queries from Reuters after Country Garden missed two dollar coupon payments this month, sparking concerns over its financial health.
According to the BNM, the banks incorporated in Malaysia had exposure to Country Garden Real Estate (CGRE), the developer’s wholly-owned subsidiary in Malaysia, amounting to less than 0.1 per cent of total banking system loans and bonds by June 2023. “CGRE is servicing their loans promptly and the local group of companies have adequate funds to meet their payment obligations,” the BNM said in an email.
Country Garden’s project in Malaysia is proceeding as planned
Country Garden is building its largest overseas development, the massive Forest City project, across four reclaimed islands in the southern Malaysian state of Johor bordering Singapore. The project, which is estimated to cost US$100 billion, aims to create a smart and green city that can accommodate 700,000 people.
However, the project has faced challenges since its launch in 2016, seeing demand fall sharply following China’s move to stem capital outflows and the COVID-19 pandemic. The project has also been criticised by some environmentalists and politicians for its potential impact on the marine ecosystem and the sovereignty of Malaysia.
On Monday, Country Garden said in a statement that the Forest City project was proceeding as planned and it had sufficient assets to support its operations. The company also said it had obtained approval from the Malaysian authorities to designate the project as a “special financial zone” to attract investment and reduce the cost of doing business there.
Country Garden’s debt woes have little impact on Malaysia’s property market
The BNM also said that it required financial institutions to consider the current and prospective property market conditions in their viability assessment for financing property development and construction projects. “In the property sector, risks from unsold units from CGRE’s various projects in the country remain manageable,” it added.
The central bank said that the current development with Country Garden Holdings Ltd in China was not expected to pose any material impact on the overall property market activity and prices in Malaysia. The Chinese property developer’s troubles have fuelled fears that the country’s property debt crisis could hamper a broader economic recovery and spill overseas.
Country Garden is one of several Chinese developers that have been struggling to repay their debts amid tighter regulations and a slowing economy. The company has a total debt of US$113 billion as of June 2023, according to Refinitiv data.
