China’s property troubles hit Country Garden with unpaid workers and deserted sites.

By Laurie ‌Chen

Tianjin’s Unfinished Construction Sites: A Silent Crisis

At an unfinished Country Garden residential complex on the ⁢outskirts ⁢of the northern Chinese metropolis of Tianjin, construction has slowed​ to a dull whirr and a few⁢ idle​ workers roam a near-empty site.

“They haven’t paid us since Chinese New Year (in⁣ January). We are all worried,” said ⁣a labourer surnamed Wang, 50, who⁣ said he had stopped work at the Yunhe Shangyuan site ‍last week.

The sprawling complex is one of two projects Reuters visited⁣ on Friday in Tianjin, a ‍port city of 14 ⁢million people about⁢ 135 km (84 miles) southeast of Beijing. Both sites are⁤ run by ⁢Country Garden, China’s largest developer by sales volume before this year, now mired in a debt crisis threatening to spill over to the wider economy.

Construction had partially or fully ⁢stopped​ at both sites – the larger one​ with a few ⁣rows of unfinished five-storey apartment blocks and the other with lifeless cranes and thick green scaffolding hanging over skeletal high-rises. Workers at dorms ​on ⁤the sites complained of months⁣ without pay.

“I’m under a lot ‌of pressure,” said a worker at the Yunhe Shangyuan site surnamed Wei, also in⁤ his 50s, who added‌ that he had only received a one-off living ⁢stipend of 4,500 yuan ‍($618) ⁤so far this year.

“I ⁤have a wife and kid who’s about⁢ to return to school, as well as elderly parents … Workers can’t live on this.”

Once considered one of the ⁤more financially ‍sound‌ developers,⁤ Country Garden is now a bellwether of​ how the cycle ⁤has turned for developers.

Its financial woes have added to the debt crisis⁤ in China’s real estate sector, which accounts for roughly a quarter of the world’s second-largest economy, currently losing steam ​amid a housing slump and weak consumer spending.

A ⁤representative of Country Garden’s Yunhe Shangyuan project said in a Wechat statement its “registered employees” were all being paid.

At the Yunjing Huating site, the government in June ‌ordered construction to be suspended to fix management problems, a project representative told Reuters in‍ a separate statement. It has since passed inspection and ⁤work is⁢ expected to resume next​ week, the person said, adding the suspension would have no impact on the‌ targeted completion date of October 2024.

Some workers are not employed directly by the developer,​ the Yunjing Huating representative said, but ⁣by its contractor, which ‍“has ​promised to ⁤pay the workers’ wages​ by the end of this month”.

The project contractor, Shenyang Tengyue Construction, did not pick up calls from Reuters or respond to‌ emails seeking comment.

The housing ministry did not comment on Reuters queries about halting of construction in the property sector in general or Country Garden in particular.

Unfinished Homes

Country ‍Garden has nearly 1 million homes to complete,‌ according to estimates from Japanese investment bank Nomura. It has ⁢not ⁤publicly acknowledged whether any of its projects have halted construction due ⁤to financial constraints.

In an exchange filing on Aug. ​10, Country Garden said it would “spare no effort to ⁤ensure delivery” of apartments and that it would ⁤“ensure the operation of projects nationwide” to​ fulfill its commitment to home buyers.

Country Garden built ⁢its success by quickly selling a large number of units for low margins and by promising “five-star living” in less popular, smaller cities.

Tianjin has about a dozen ⁣Country Garden‍ projects, with the ⁢majority finished ⁤and delivered, said Gao Fei, ⁣investment advisory⁢ manager at the‌ Tianjin branch of Centaline Property Agency.

Gao said halted construction projects were “relatively rare” in the city,⁣ representing ⁣about a dozen out of 300 sites for sale, but “there are indeed projects whose development progress has ‍slowed down”.⁢

“In China, it ⁢is ⁣a ‌common phenomenon because now all​ developers control the‍ rhythm of construction based on the sales rate … so ⁤once sales slow down, so will construction,” ⁣Gao told ‌Reuters.

Confidence in‍ the sector took a big hit last year after⁤ many Chinese ​homebuyers threatened to stop repaying mortgages, as developers stopped building pre-sold⁢ housing projects due to strapped ‌liquidity and strict COVID-19 restrictions.

China’s​ real estate market slightly rebounded ⁣in the first quarter of 2023 but transaction volumes have since ​declined,‍ with the majority of city housing markets remaining‌ in a “depressed” state, said Gao.

“We have ‍seen that many home buyers are affected by a⁣ lack of income, and⁤ their home buying‌ choices and what they ⁤can afford ⁣have been impacted‍ in⁤ turn.”

‍(Reporting by Laurie Chen ⁤in Tianjin; Additional reporting by Clare Jim in Hong Kong; Editing by Sumeet Chatterjee ‌and Sonali Paul)

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