Chinese developer Country Garden has stated that its $100 billion project in Malaysia is proceeding as planned and that it has sufficient assets, despite concerns about its financial strength due to debt issues. This announcement comes after the company missed two coupon payments totaling $22.5 million, raising concerns about the impact of China’s property debt crisis on the broader economy. Country Garden’s Singapore and Malaysia unit reassured that its projects in Malaysia are operating normally and experiencing strong sales performance. The company also mentioned that it is considering various debt management measures to ensure its long-term future development.
According to Malaysia’s central bank, banks in the country have limited exposure to Country Garden, and the company’s Malaysia unit is promptly servicing its loans. The central bank also stated that the current developments with Country Garden are not expected to have a significant impact on Malaysia’s overall property market activity and prices. This reassurance comes after Malaysian Prime Minister Anwar Ibrahim announced that the project would be designated a “special financial zone” to attract investment and reduce the cost of doing business in the area. The incentives offered include a special income tax rate for skilled workers and multiple entry visas.
The Forest City project, which is Country Garden’s largest overseas development, is being built across four reclaimed islands in the state of Johor, bordering Singapore. The project has faced challenges since its launch in 2016, including a decline in demand due to China’s capital outflow restrictions and the COVID-19 pandemic. Concerns have also been raised about a potential housing glut and environmental damage from the land reclamation effort. However, the project aims to house 700,000 people by 2035 and includes various amenities such as office towers, malls, and schools.
Analysts believe that the new designation of Forest City as a special financial zone will attract companies and residents from Singapore, where costs are higher. They expect this move to revitalize the project and have a positive impact on Country Garden. The company itself sees the incentives from the Malaysian government as a sign of confidence in the project and is now focused on exploring more investment opportunities in the second phase of development. Shares of Country Garden closed flat after initially rising by 9% on the day of the announcement.
Forest City is a joint venture between Country Garden and Esplanade Danga 88, a private Malaysian company backed by the Johor government and the state’s sultan. The project has received negative publicity in recent years, but analysts believe that the incentives offered by Malaysia will help improve its reputation. Overall, Country Garden remains optimistic about the project’s future and its operations in Malaysia.
