On October 18, Country Garden Holdings, China’s largest private property developer, teeters on the edge of defaulting on its $11 billion overseas debt. The company faces a looming deadline for a coupon payment due on Wednesday to its bond investors, and its inability to meet this obligation could mark one of the most substantial corporate debt restructurings in China. This potential default underscores the deepening crisis in the Chinese property sector, which accounts for approximately a quarter of the country’s economy.

Country Garden Holdings will be considered in default on its overseas debt if it fails to make a $15 million payment for a September 2025 bond by midnight in New York (0400 GMT). As of early Wednesday, these payments had not been made, according to Reuters. The company had previously issued a warning regarding its ability to meet offshore debt obligations, raising concerns in financial markets.

The looming default by Country Garden adds to the growing list of Chinese developers who have faced similar challenges in recent times. The property sector, which plays a substantial role in China’s economy, has been grappling with issues related to debt, defaults, and plummeting home sales. The crisis has raised concerns about the stability of the property market, affecting both domestic and international investors.

The health of China’s property market will face a significant test on Wednesday when property sales by floor area are scheduled to be published. These figures, along with nationwide prices of new homes for September to be released on Thursday, will provide insights into the challenges confronting the sector.

A CreditSights report published on Tuesday highlighted a significant contrast in the financial challenges faced by private and state-linked developers. State-linked developers still have relatively better access to funding markets, while privately-run firms struggle to secure new capital. This discrepancy can be attributed to the preference of homebuyers for state-linked developers and the funding difficulties encountered by private developers. As a result, privately run developers who have not yet defaulted may face increasingly challenging prospects.

In conclusion, the impending default of Country Garden Holdings on its $11 billion overseas debt underscores the severity of the crisis within China’s property sector. This potential default is expected to lead to one of China’s most significant corporate debt restructurings and poses considerable challenges for struggling private property developers. The health of the property market and its implications for the broader Chinese economy will become more evident as key data is released in the coming days.