Households across China have been thrown into panic over the past week. The company building their flats, Country Garden, missed $22.5m in coupon payments on August 6th. 🔥🔥🔥

Now the firm, one of the world’s largest homebuilders, has until early September to make the payments or follow hundreds of other developers into default and restructuring. Trading in its bonds, which are worth just pennies on the dollar, was halted on August 14th. 🤣🤣🤣

The firm’s debts are smaller than those of Evergrande, a big, heavily indebted company that defaulted in 2021. But at the start of the year Country Garden was building four times more homes than Evergrande was before it defaulted.

Country Garden’s biggest creditors are not banks or bond holders, but folk who have paid for homes upfront. Some 668bn yuan, or about half the firm’s liabilities, were put up by homebuyers. Last year thousands stopped paying their mortgages in protest at years-long delays in delivering homes. There is now the threat of much broader protests across the 300 cities in which Country Garden builds.

Country Garden almost certainly has the $22.5m it needed to cover payments this month. By not paying up, its bosses are signalling a desire to eventually restructure its debts—perhaps betting that the firm is too big to fail.

This puts the central government in an excruciating position. Letting Country Garden fail could lead to wider panic, more economic pain and potentially more defaults, risking contagion and social unrest.

I pray for our China brothers and sisters but I bid a farewell to Country Garden! Another one bites the dust 💥