Shares of Country Garden, a top Chinese property company, recently hit lows. The firm struggled to pay off its dollar debts, causing investor concern.
The company finally made payments on the last possible day.
This could spell trouble not just for China but also for Brazil. Investors worry about a looming credit crisis in China’s real estate sector.
According to its latest financial report, Country Garden owes about US$15 billion. This debt amounts to nearly half its quarterly revenue of US$31 billion.
This pattern mirrors what happened with Evergrande in 2021. Any financial hiccup in big construction firms could trigger a broader crisis.
Key points to consider
- Country Garden’s struggles reveal broader issues in Chinese real estate.
- The company’s large debts could shake China’s banking system.
- If banks face a crisis, people will find it harder to get loans.
- China’s real estate is the world’s largest consumer of iron ore, affecting global exports.
- China’s real estate slowdown impacts Brazil’s exports and overall economic activity.
What is Going On?
China’s strict COVID-19 measures have hurt its economy. Consumers have lost confidence, affecting the real estate market.
Property sales have plunged. Country Garden’s revenue also dropped, making it hard to pay off debts.
As a result, its credit rating has been downgraded.
Impact on Brazil
Paulo Gitz of XP points out that China’s real estate has long been an economic driver. A crisis would impact jobs and income in China and worldwide.
Two main issues arise.
The construction sector uses huge amounts of imported materials like iron ore. A slowdown affects companies like Vale, a key Brazilian exporter.
If the Chinese buy less, global demand drops. Brazil, a major trade partner, could suffer. Lower revenue would also hamper Brazil’s efforts to eliminate its public deficit.
China’s Response
China’s central bank is cutting interest rates to boost the economy. But many feel these steps are not enough to avert a credit crisis.
More: Brazil news in English, every day from The Rio Times.
Live Market IntelligenceBrazil — Live Market Board
Rio Times · Live Market Intelligence
Brazil — Live Market Board
-0.52%
171,336.99
-0.52%
71,905.78
+0.05%
10,597.06
+0.07%
2,848,945
—
2,528.01
-1.88%
| Instrument | Last | Change | YoY | Prev. | High | Low | Volume |
|---|---|---|---|---|---|---|---|
| IBOV | 171,336.99 | -0.52% | +10.36% | 172,236.05 | — | — | — |
| USD/BRL | 5.57 | -0.25% | +5.27% | 5.58 | 5.59 | 5.57 | — |
| SELIC | 13.75% | — | — | — | — | — | |
| PETR4 | 44.95 | -0.53% | +38.91% | 45.19 | 45.68 | 44.50 | 54,961,500 |
| VALE3 | 64.80 | -1.98% | -0.63% | 66.11 | 66.11 | 64.20 | 22,893,100 |
| ITUB4 | 41.20 | -1.25% | +4.94% | 41.72 | 42.50 | 41.15 | 20,213,600 |
| BBDC4 | 14.54 | -0.95% | -23.79% | 14.68 | 14.84 | 14.30 | 51,531,000 |
| BBAS3 | 17.10 | +0.47% | -24.93% | 17.02 | 17.17 | 16.82 | 27,692,900 |
| B3SA3 | 14.48 | -2.49% | +10.37% | 14.85 | 15.14 | 14.26 | 39,095,500 |
| ABEV3 | 15.79 | +1.15% | +19.80% | 15.61 | 15.79 | 15.55 | 25,853,700 |
| WEGE3 | 50.95 | +0.41% | +12.30% | 50.74 | 51.83 | 50.58 | 12,799,900 |
| PRIO3 | 60.02 | +1.06% | +53.00% | 59.39 | 60.09 | 58.35 | 10,242,700 |
| SUZB3 | 54.46 | +0.48% | +16.62% | 54.20 | 55.50 | 53.86 | 9,241,700 |
| RENT3 | 29.79 | -3.37% | -29.19% | 30.83 | 31.29 | 29.70 | 13,596,000 |
| AZZA3 | 14.73 | -2.58% | -47.69% | 15.12 | 15.55 | 14.52 | 2,463,700 |
| CSNA3 | 4.38 | -2.45% | -47.17% | 4.49 | 4.57 | 4.36 | 18,925,300 |
| GGBR4 | 25.83 | +3.65% | +35.24% | 24.92 | 25.93 | 25.14 | 9,678,500 |
| ENEV3 | 27.05 | -1.28% | +39.79% | 27.40 | 27.74 | 26.75 | 8,263,300 |
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