One of China‘s largest real estate developers, Country Garden, has issued a warning that its first-half losses could reach $7.6 billion (£6 billion).
The announcement is the most recent indication of the serious problems the second-largest economy in the world is having.
China plunged into deflation for the first time in more than two years, according to official data released this week.
Along with a steep decline in exports, youth unemployment has reached an all-time high.
On Friday afternoon, Country Garden Holdings‘ stock fell more than 5% in Hong Kong exchange.
In a statement to the Hong Kong Stock Exchange, Country Garden stated that it “expects to record a net loss ranging from approximately RMB45 billion [$6.24 billion; £4.9 billion] to RMB55 billion for the six months ended 30 June 2023.”
The anticipated deficit contrasts with a $265 million profit at this time last year.
The company added that it has formed a special task group under the leadership of Yang Huiyan, its chairman, to look for measures to revive the company.
The company’s rating was reduced earlier on Thursday by rating agency Moody’s, which highlighted “heightened liquidity and refinancing risks” as its justification.
It happened at a time when China was struggling economically, which has led some to wonder how quickly the country is recovering from the pandemic.
In line with expectations, the nation’s exports declined by a larger-than-expected 14.5% in July compared to the same month last year, while imports decreased by 12.4%.
As a record 11.58 million university graduates are anticipated to enter the job market this year, youth unemployment, which is at an all-time high, is also being keenly studied.
President of the United States Joe Biden stated on Thursday that China’s economic woes are a “ticking time bomb.”
Mr. Biden also stated that “China is in trouble” while highlighting its high unemployment and ageing workforce at a fundraising event in the western state of Utah.
The nation is also addressing issues with the housing market and the soaring local government debt.
Evergrande, formerly China’s largest real estate company, disclosed this month that it lost a combined $81.1 billion in 2021 and 2022.
It happened at the same time that the company, which went into debt default in late 2021, announced to investors its overdue earnings.
Evergrande has been battling debts worth an estimated $300 billion.
The significant losses show how severely the developer was impacted by the Chinese real estate crisis in recent years.
Given that the property sector makes up around a third of China’s GDP and encompasses everything from home construction to the manufacturing of white goods used in them, issues there might have a significant influence on the nation.