China

Ratings agency Moody's on Thursday downgraded Chinese developer Country Garden's corporate family rating (CFR) to Caa1 from B1, citing heightened liquidity and refinancing risk after the company missed bond payments, Reuters reported. Caa1 rating is a level that signals a very high credit risk, according to the ratings agency's website. Country Garden expects to record a half-year loss owing to higher impairment provisions on projects, it said on Thursday.

Country Garden, China’s biggest developer by sales, has been pummeled in the markets twice in the past week, the New York Times reported. Investors are panicked by two events: On Aug. 1, the company scrapped a plan to inject cash into the business, something it needs. This week, it missed two interest payments on bonds. The bond payments, which are owed in U.S. dollars, are relatively small in value, but by missing them, the company put itself at risk of default. Country Garden’s market value has more than halved since the start of the year.

China’s deepening economic malaise has entered a potentially dangerous new phase, the Wall Street Journal reported. In July, consumer prices in the world’s second-largest economy tipped into deflationary territory for the first time in two years, as a host of other problems weigh on its recovery after lifting Covid-19 curbs. A drop in exports is accelerating, youth unemployment has hit record highs and its housing market is mired in a protracted downturn.

China's imports and exports fell much faster than expected in July as weaker demand threatens recovery prospects in the world's second-largest economy, heightening pressure for authorities to release fresh stimulus to steady growth, Reuters reported. The grim trade numbers reinforce expectations that economic activity could slow further in the third quarter, with construction, manufacturing and services activity, foreign direct investment and industrial profits all weakening.

Chinese developer Country Garden Holdings Co.’s stock and bonds plunged as noteholders said they haven’t received coupon payments effectively due Monday, further darkening sentiment in the crisis-stricken property sector, Bloomberg News reported. Some holders of two different notes said they didn’t receive coupon payments as of Tuesday afternoon. The investors asked not to be named as they’re not authorized to speak publicly. The company owed $10.5 million of interest on a dollar bond that matures in 2026 and $12 million on a note due 2030, according to data compiled by Bloomberg.

Cryptocurrency exchange Huobi dismissed the ongoing rumors against its insolvency, which was fueled by total value locked (TVL) data that briefly showed $64 million in outflows between Aug. 5-6 amid ongoing investigations from Chinese authorities, CoinTelegraph.com reported. Outflows from Huobi over the weekend, based on data collected by decentralized finance (DeFi) TVL aggregator DefiLlama, showed the exchange’s TVL falling to $2.5 billion at the time of writing, down from $3.09 on July 6. Moreover, rumors that the exchange’s leadership had been arrested in China first surfaced on Aug.

China’s local government financing vehicles are showing more signs of stress, with a record number missing payments on a popular type of short-term debt last month, Bloomberg News reported. A total of 48 LGFVs were overdue on commercial paper, which typically carries a maturity of less than a year, up from 29 in June, according to a Huaan Securities Co. report citing data from the Shanghai Commercial Paper Exchange. Their missed payments amounted to 1.86 billion yuan ($259 million), versus 780 million yuan in June.

One measure of new foreign investment in China fell to the lowest level in 25 years in the second quarter, fueling concerns about how much geopolitical tensions and the economy’s slowing recovery can hurt business confidence, Bloomberg News reported. Direct investment liabilities — a gauge of foreign direct investment in China — slumped to just $4.9 billion in the April-June period, according to figures released by the State Administration of Foreign Exchange on Friday. That was down 87% from the same period last year and was the smallest amount in any quarter in data back to 1998.

Half a year after China lifted Covid-19 restrictions and reopened its borders, few international travelers are coming—another sign of decoupling between China and the West that could have negative repercussions for a long time, the Wall Street Journal reported. Foreign travelers’ absence is particularly evident in major cities like Beijing and Shanghai, where the numbers of foreigners who visited in the first half of the year totaled less than a quarter of comparable figures in 2019, before the Covid pandemic.