Chinese developer Country Garden has assured investors that its $100 billion project in Malaysia is proceeding as planned, despite concerns over its financial strength. The company’s statement comes after it missed two dollar coupon payments this month, raising fears about a possible property debt crisis in China. However, Country Garden’s Singapore and Malaysia unit stated that its projects in Malaysia are operating normally, with strong sales performance and a safe and stable overall operation in the region.
Country Garden’s flagship project in Malaysia is the Forest City development, located on four reclaimed islands in the southern state of Johor. The project aims to accommodate 700,000 people by 2035 and includes residential buildings, office towers, malls, and schools. However, the development has faced challenges, including a decline in demand due to China’s capital outflow restrictions and the impact of the COVID-19 pandemic. There have also been concerns raised by Malaysians regarding a potential housing glut and environmental damage caused by the land reclamation effort.
To attract investment and reduce the cost of doing business, Malaysian Prime Minister Anwar Ibrahim recently designated the Forest City project as a special financial zone. This move offers incentives such as a special income tax rate of 15% for skilled workers and multiple entry visas. Analysts believe that these incentives will attract companies and residents from Singapore, where costs are significantly higher.
The market has responded positively to the news, with Country Garden’s shares rising over 8% following the announcement. RHB analyst Loong Kok Wen stated that the new designation should revitalize the Forest City development, which has faced negative publicity in recent years. Steven Leung, the director of UOB Kay Hian in Hong Kong, also expressed optimism about the incentives, stating that they would be very positive for Country Garden.
The Forest City project is a joint venture between Country Garden and Esplanade Danga 88, a private Malaysian company backed by the Johor government and the sultan of the state. Despite concerns about China’s property debt crisis, Country Garden remains confident in the progress of its Malaysian development and is actively exploring further investment opportunities for future growth.
