China’s Property Market Has Slid Into Severe Depression, Real-Estate Giant Says


One of China’s largest developers said the country’s property market has tumbled into a severe depression, using some of the strongest language yet to describe the yearlong downturn and the financial pain it has caused.

Country Garden Holdings Co.


2007 -4.23%

, which for years ranked as China’s top real-estate developer by contracted sales, on Tuesday reported a 96% drop in first-half profit after selling a third fewer homes than it did a year ago.

The Guangdong-based company said the market has struggled with weakening expectations, sluggish demand and declines in property prices.

“All these exert mounting pressure on all participants in the property market, which has slid rapidly into severe depression,” the company said. It added that the resurgence of Covid-19 in cities across China has also slowed construction activity and weighed on its performance.

Country Garden eked out a small profit equivalent to $89 million, versus $2.2 billion in the first six months of 2021.

The company has long been regarded as one of China’s financially strongest developers, but like many of its peers it has struggled to overcome a crisis of confidence that has caused home buyers and investors to back away from the Chinese property market.

Its shares and dollar-bond prices have plunged this year, despite Country Garden’s repeated attempts to convince the market that it can withstand the crisis. The company was recently among a handful of developers that were picked to sell government-insured domestic bonds under a new pilot program.

More than 30 Chinese real-estate companies, including

China Evergrande Group

and Sunac China, have already defaulted on their international debt. Many privately run developers this month issued profit warnings; some said they are expecting a more-than-90% decrease in net profit, and a few are expecting to post losses.

Midea Real Estate Holding Ltd.

, another Chinese developer, last week reported a 29% drop in net profit and said the property downturn in the first half took place amid “profound changes unseen in a century” and the lingering Covid pandemic.

“The real estate market is undergoing a cruel and drastic reshuffling process,” said the Guangdong-based company, adding it would “forge ahead in a tough way.”

China’s deflating property bubble has also spilled over into other sectors, including the countries’ privately run banks and its largest state-owned asset managers that specialize in managing portfolios of troubled loans and distressed debt.

China Cinda Asset Management Co.

, the country’s largest bad-debt manager, on Monday reported a 33% drop in first-half profit to the equivalent of $653 million, in part because it booked higher impairment losses on its assets.

The company said the Chinese government is “faced with an increasingly complex, grim and uncertain development environment,” as it implements pandemic-control measures and tries to stabilize the economy.

Cinda’s

peer, China Huarong Asset Management Co., reported a $2.7 billion net loss for the first half, hurt in part by the real-estate downturn. The company, which is partly owned by China’s Ministry of Finance, described the country’s economic conditions as “extremely complex and difficult.”

Huarong’s

international finance arm separately predicted that in the second half, China will face manifold challenges including pressure on investment, consumer spending and export trade.

As China’s economy stalls, protests have broken out over frozen bank accounts and mortgage payments for unfinished homes. WSJ explains the reasons behind the simmering discontent and how Beijing authorities are trying to keep a lid on it. Photo Composite: WSJ

Country Garden on Tuesday sounded an optimistic note for the future. It said China’s economy is resilient, remains positioned for long-term growth, and the country’s urbanization is still under way. “The real estate industry will always exist,” the company added.

Its chairman, Mo Bin, apologized to investors for the sharp drop in profit during an earnings call. Mr. Mo said the company will keep adjusting its strategies and focus on keeping a balance between its cash flow, assets and debts, and profits. The Chinese property market will return to a stage of healthy development by next June, he predicted.

Write to Rebecca Feng at rebecca.feng@wsj.com

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