Country Garden, China's largest real estate developer, is expected to lose US$7.6 billion in the first half of 2023, which would be its largest loss since it went public in 2007. The news presents another major challenge for Country Garden, as the company failed to make a key interest payment on time on its U.S. dollar bonds this week.

Country Garden's sales fell by 60% compared with the same period last year, a decline that was significantly greater than in previous months. Developers also say their profit margins have shrunk, real estate projects have lost value, apartment sales have fallen for four consecutive months and refinancing has become increasingly difficult.

Why is China’s housing market in trouble? China's real estate market showed signs of recovery earlier this year after the government lifted a ban on equity refinancing and directed banks to provide financial support to specific developers, including Country Garden. However, the market rebound was short-lived, with sales falling in the second quarter and China's economic growth also slowing.

Since the Chinese government cracked down on debt levels in the real estate industry in August 2020, China's real estate market has fallen into a credit crisis. Years of rapid market growth have led to the emergence of “ghost towns” where supply significantly exceeds demand and developers scramble to capture profits. Still, real estate investment in China fell nearly 8% in the first half of this year.