All eyes have been on China lately, particularly the bubble that appears to be near bursting in their property market. Earlier this year, alarm bells sounded as the Chinese developer Evergrande was not able to pay back its depositors and filed for bankruptcy. Then, the biggest developer in the country, Country Garden Holdings, started to show signs of distress. This prompted many to pull their investment out of many Chinese property firms, causing stock prices to plummet. But now those stocks have bounced back, including Everrande, which is up almost 90 percent, thanks to the $22.5 million repayment made by Country Garden to avoid default.
This repayment is good news, but the company is not in the clear. The payment was made hours before the one month grace period ended. Many worry that the company will not be able to make its future debt obligations without some help from the government. Country Garden is a huge company, four times bigger than Evergrande, with assets worth around $215 billion, so a default would cause a lot of economic harm to China’s already slowing economy. But despite the company’s importance and its owner’s ties with the communist party, a bailout isn’t guaranteed. The Chinese government has become more centralized recently and seems to have less of an appetite for bailouts, instead encouraging the completion of unfinished projects and the protections of the Chinese citizens that funded them. This repayment might have pushed the stock prices of Chinese property firms up, but there is still plenty of reason to worry about the health of the Chinese property sector in the near future.