28-8-2023 (KUALA LUMPUR) Malaysia’s central bank, Bank Negara Malaysia, announced on Monday (Aug 28) that domestic banks were at low risk of financial instability due to their exposure to Country Garden, China’s largest property developer.
According to the central bank, the banks incorporated in Malaysia have less than 0.1 percent of their total loans and bonds tied to Country Garden Real Estate (CGRE), the developer’s wholly-owned subsidiary in Malaysia. This information was conveyed to Reuters via email.
Bank Negara Malaysia further stated that CGRE was diligently servicing its loans and that the local group of companies had sufficient funds to fulfill their payment obligations.
In response to concerns about its financial strength, Country Garden declared on Monday that its US$100 billion project in Malaysia was progressing as planned and that it possessed ample assets.
The Malaysian central bank emphasized that financial institutions must consider the prevailing and future conditions of the property market when assessing the viability of financing property development and construction projects.
“In the property sector, risks associated with unsold units from CGRE’s projects in the country remain under control,” Bank Negara Malaysia added.
It also stated, “The ongoing developments involving Country Garden Holdings Ltd in China are not expected to significantly impact overall property market activity and prices in Malaysia.”
Country Garden’s statement came after the company defaulted on two coupon payments totaling US$22.5 million this month, raising concerns about a potential property debt crisis in the country that could hinder broader economic recovery and spill over into other regions.
Country Garden is currently constructing its largest overseas development, the expansive Forest City project, spanning four reclaimed islands in the Malaysian state of Johor, which borders the prosperous nation of Singapore. The project, which has approximately 9,000 residents, has encountered challenges since its launch in 2016, with demand plummeting following China’s measures to curb capital outflows and the onset of the COVID-19 pandemic.
Last week, Malaysian Prime Minister Anwar Ibrahim announced that the Forest City project would be designated as a “special financial zone” to attract investments and reduce the cost of doing business in the area.
