Written by a. Ananthalakshmi
KUALA LUMPUR (Reuters) – Struggling Chinese real estate developer Country Garden said on Monday its $100 billion project in Malaysia is progressing as planned and has sufficient assets despite concerns about its financial health.
The suspension by China’s largest private developer came after it defaulted on two dollar vouchers this month totaling $22.5 million, raising fears that the country’s real estate debt crisis could derail a broader economic recovery and spill over abroad.
“Our company’s projects in Malaysia are operating normally and sales performance is strong,” the developer’s Singapore and Malaysia unit said in a statement, adding that its overall operations in the region were “safe and stable.”
“Various debt management measures are being considered to effectively solve cyclical liquidity pressures, to ensure the company’s long-term future development,” it added, without elaborating.
Country Garden is building its largest overseas development, the massive Forest City project, across four reclaimed islands in the southern Malaysian state of Johor that borders the wealthy city of Singapore.
The project, which has faced challenges since its launch in 2006 and is now home to about 9,000 people, has seen demand drop sharply after China’s move to stem capital outflows and the COVID-19 pandemic.
Malaysians have also expressed concern about the potential for housing glut and environmental damage from massive land reclamation efforts.
The project aims to house 700,000 people by 2035 in a development project that includes office towers, shopping centers and schools, in addition to residential buildings.
The company’s statement comes after Malaysian Prime Minister Anwar Ibrahim said the project would be designated a “special financial zone” to attract investment and help lower the cost of doing business there.
Among the new incentives introduced were a special income tax rate of 15 percent for skilled workers and multiple entry visas, Anwar said in a statement on Friday.
Long Kok Win, an RHB analyst, said the new rating would attract companies and residents from Singapore, where costs are much higher.
“This move should help revitalize Forest City, which has received a lot of negative publicity over the past few years,” the analyst said.
Stephen Leung, Hong Kong-based director of UOB Kai Heian, said the Malaysian incentives should be “very positive” for Country Garden.
The Chinese developer said the incentives provided by Anwar’s government showed its confidence in the project, which is now in a second phase of development focused on exploring more investment opportunities.
Shares of Country Garden rose more than 8% on Monday.
Forest City is a joint venture with Esplanade Danga 88, a private Malaysian company backed by the Government of Johor and the Sultan of the state.
(Reporting by A. Ananthalakshmi; Additional reporting by Claire Jim in Hong Kong; Editing by Martin Beatty and Clarence Fernandez)