{"text":[[{"start":6.95,"text":"This article only represents the author's own views."}],[{"start":12.75,"text":"Country Garden Holdings Co. Ltd. (2007.HK), the property developer once teetering on the brink of bankruptcy, is seeing some glimmers of daylight after its near-death experience. Its latest annual results show it posted a surprising profit of 3.26 billion yuan ($472 million) last year, marking a huge leap forward from its 32.8 billion yuan loss in 2024."}],[{"start":44.83,"text":"While that headline profit looks good at first glance, the improvement was entirely devoid of any new growth, owing instead to non-cash gains of 82.1 billion yuan from its debt restructuring. In effect, the restructuring delivered purely paper profits, not a turnaround in its core operations. The reality is that property sales remain very sluggish, with revenue from property sales plunging 38.7% year-on-year to 154.9 billion yuan last year. And after including 44.5 billion yuan in impairment provisions for properties under construction and completed properties held for sale, the company reported a gross loss of 43.1 billion yuan for the year."}],[{"start":94.88,"text":"Independent auditor Zhonghui Anda CPA also wanted to get in its own two cents by issuing a disclaimer of opinion in the latest report. It pointed out that 107.6 billion yuan of the company’s 148 billion yuan in borrowings were classified as current liabilities, while the company’s cash and cash equivalents stood at just 18.7 billion yuan. It said those factors, combined with several others, including pending litigation, “indicate the existence of material uncertainties which may cast significant doubt on the group’s ability to continue as a going concern and, therefore, that the group may not be able to realize its assets and discharge its liabilities in the normal course of business.”"}],[{"start":145.32,"text":"Re-inclusion in global indexes"}],[{"start":148.45,"text":"While last year's results suggest Country Garden is far from out of the woods just yet, the threat of creditor actions and winding-up petitions against it has eased for now. That follows the passage of a restructuring plan by the end of last year for all $17.7 billion of the company’s offshore debt and nine onshore bonds totaling 13.77 billion yuan. Country Garden's borrowings have also decreased from 253.5 billion yuan to 148 billion yuan as of the end of last year."}],[{"start":186.04,"text":"The restructuring of most of its debt has caused the investment community to start taking a fresh look at Country Garden. Global ratings compiler MSCI reinstated the company into its MSCI China Small Cap Index in February, making it the sole property stock among 21 new additions. In March, FTSE Russell also included Country Garden in its indexes, making it the only Chinese property developer with that distinction."}],[{"start":216.73,"text":"Inclusion in global indexes means numerous funds worldwide will acquire Country Garden shares based on index weightings, boosting the stock’s liquidity and potentially lifting its price. That’s particularly significant since shares are a key component of Country Garden's restructuring plan, which involves convertible bonds. Thus, being added to major indexes provides a substantial vote of confidence in the company and its outlook."}],[{"start":246.56,"text":"Rehiring veterans"}],[{"start":248.94,"text":"On the operational front, reports surfaced last month that Country Garden is reaching out to some veteran employees laid off in recent years, seeking to bring them back into the fold. The company said it’s targeting only a few specific, critical rehires to fill gaps. But the mere act of any hiring is a positive signal, potentially indicating the restart of stalled projects whose revival would improve the company's cash flow."}],[{"start":276.68,"text":"Actively recruiting also signals the company now has the resources to use for new tasks, and isn’t just letting headcount dwindle through natural attrition to save money. Such hiring is also hardly the behavior of a company on the verge of collapse, showing Country Garden's liquidity constraints have eased at least somewhat after being in a state of crisis over the last two years."}],[{"start":300.82,"text":"Policy tailwinds are also supporting the property market. The Government Work Report issued during this year's annual meeting of the National People’s Congress in March emphasized the need to focus on stabilizing the real estate market, and systematically promoting city-specific policies to control incremental volume, reduce inventory and optimize supply. In fact, the central government has been rolling out new measures nearly nonstop since last year to try to stabilize the housing market, with many regions easing home-buying restrictions."}],[{"start":336.95,"text":"Concurrently, the government has also refined a “whitelist” mechanism that makes it easier for developers to get financing via bank loans once their projects are included on the list. Bank loans for whitelisted projects can not only be extended but can also have their principal repayment deferred. Moreover, banks don’t need to classify such loans as non-performing assets in the short term. Such terms significantly lighten the debt repayment pressure on developers, allowing them to focus on project completion and delivery that can help to ease their liquidity pressure. The whitelist also serves to boosts confidence in property developers, putting home buyers at greater ease when making purchases. Seeing such government backing, these companies’ creditors may also become more willing to discuss debt restructuring."}],[{"start":391.28,"text":"Phoenix awaiting rebirth"}],[{"start":394.26,"text":"Country Garden's property sales, while still far below their peaks, have, upon closer examination, begun to stabilize. A review of its regular reports shows its monthly sales have consistently remained within the 2.2 billion yuan to 2.7 billion yuan range over the last four months."}],[{"start":415.81,"text":"Some may still complain that the company’s current sales are less than one-tenth of their peak of 46.65 billion yuan in February 2021. But the more important reality is that the company has managed to stabilize its sales despite all the current factors working against it, indicating its business may have begun to bottom out."}],[{"start":440.34000000000003,"text":"It goes without saying that China’s property stocks will follow the future direction of the real estate market. The government is currently promoting policies to stabilize that market, and a growing number of property developers are successfully restructuring their debt. While sales have yet to rebound, there are still initial signs that a bottom could be near. While more time will be needed for a true recovery, Country Garden, having restructured its debt, has both significantly reduced its debt burden and lowered its interest expenses. At the same time, extension of its debt maturities has given it time to reorganize its business. If things continue to go smoothly, Country Garden may, like the phoenix in its corporate logo, rise once more from the ashes as the Chinese property market gradually warms."}],[{"start":501.7300000000001,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1775178119_9934.mp3"}