Country Garden’s debt ghosts haunt Forest City

Malaysia’s mega-project was struggling before the Chinese property giant was engulfed in a cash crisis

Welcome to the 16th edition of Between The Lines. This week we look at the Country Garden ghosts haunting the US$100-billion Forest City mega-project. It is a spooky tale. Also, we focus on the rumors swirling around President Xi Jinping and the media frenzy surrounding Huawei. Let’s get started.

China’s real estate ruckus has spilled over into what was billed as a luxury retreat “on four artificial islands” close to the Malaysian state capital of Johor Bahru. The $100-billion Forest City mega-project sits just across the water from Singapore, an eerie reminder of Chinese President Xi Jinping’s $1 trillion Belt and Road Initiative.

Built by debt-laden Country Garden, the first stage of the development resembles a “ghost town,” while there are serious “ecological” concerns after years of construction, media reports revealed.

Agence France-Presse, as published by the New Straits Times, picked up the story at the weekend:

Aimed at middle-class Chinese buyers, Forest City has weathered scant sales, Chinese currency controls, a pandemic shutdown and public anger at China’s growing influence in Malaysia.

“But its future is in doubt again because of the financial woes of Chinese property giant Country Garden. The project developer is now saddled with $196 billion of debt,” AFP stated.

On the ground, there is a feeling of emptiness. Initially, around 700,000 people were expected to live on the islands. But so far, the number of residents totals just “several thousand,” the Insider reported last year, adding:

Country Garden [said it] sold more than 20,000 residential units to date. It is unclear exactly how many units have been constructed in Forest City.

Still, property prices have sky-rocketed in the past couple of years, according to the Insider. “In 2017, apartments in Forest City started at $170,000. Today, condos in the development retail for as much as $1.14 million,” Insider said. 

To put that into context, the average property sale price in Johor Bahru is just $141,000. So much for “ghost” cities in paradise.

Rumors continue to swirl around Xi Jinping. Photo: Wikimedia Commons

Is Xi in a huff after the Party elders row?

Political gossip is suppressed in China. Secrecy has now become an impenetrable barrier erected to keep the ruling Communist Party in power.

But earlier this week, rumors started to circulate about President Xi Jinping’s decision to skip the G20 summit in New Delhi at the weekend.

There was talk about the state of his health. There were rumblings about a fallout with India’s Prime Minister and G20 host Narendra Modi. And there were whispers of political problems in his own backyard, triggered by the economic crisis.

Cue Katsuji Nakazawa, a Tokyo-based senior writer at Nikkei Asia:

A precursor seems to have been this summer’s Beidaihe meeting, the annual get-together of incumbent and retired leaders of the Chinese Communist Party at the seaside resort in Hebei Province.

“Sources said that at [last month’s] gathering, a group of retired Party elders reprimanded the top leader. Xi later expressed his frustration to his closest aides, according to the information gathered,” Nakazawa reported on September 5. 

To add spice to the speculation, this “will be the first time” that Xi has missed a G20 summit. The mystery deepens.

Huawei has been hit by a raft of US sanctions. Photo: File

Huawei’s breakthrough might be check Mate

There has been a great deal of hype about Huawei’s Mate 60 Pro smartphone and the cutting-edge chips that power it. Since it was rolled out in a soft launch last week, the media has been in a frenzy. 

The Washington Times reported that the banned Chinese group had “just punched an unexpected hole through the Biden administration’s high-tech defenses.” 

A reference to Washington sanctions depriving Beijing of advanced semiconductor, or chip, technology. But Barrons, which is published by Dow Jones, was not buying into the disaster scenario:    

Never mind the headlines about new Huawei phones. Global export restrictions are only beginning to squeeze China’s chip-making abilities. Reality Check. Everyone loves a good story. 

“The latest one to get traction among media outlets this week was how China had somehow circumvented US chip sanctions and achieved a significant manufacturing breakthrough,” Barrons reported.

In short, “the significance of the latest phones made by Huawei has been overstated,” and a “new round of restrictions” that came in last week will further hit its “chip-making capabilities.” Check Mate, we believe.

And finally …

Two people were arrested this week after smashing a hole through a Ming Dynasty-era section of the Great Wall of China in northern Shanxi province. They used an excavator to create “a shortcut” to travel to work on a construction project. Seriously, you could not make it up. Now, check it out.