SINGAPORE (Reuters) – Malaysia’s central bank said on Monday that banks incorporated in the Southeast Asian nation faced limited financial stability risk arising from exposure to China’s largest property developer, Country Garden.
Such banks’ exposure to Country Garden Real Estate Sdn Bhd (CGRE), the developer’s wholly-owned subsidiary in Malaysia, amounted to less than 0.1% of total banking system loans and bonds by June 2023, the bank told Reuters in an email.
“CGRE is servicing their loans promptly and the local group of companies have adequate funds to meet their payment obligations,” Bank Negara Malaysia added.
On Monday, the Chinese firm said its $100-billion project in Malaysia was proceeding as planned and it had sufficient assets, despite concerns over its financial strength.
The Malaysian central bank said it required financial institutions to consider the current and prospective property market conditions in their viability assessment for financing property development and construction projects.
“In the property sector, risks from unsold units from CGRE’s various projects in the country remain manageable,” it added.
“The current development with Country Garden Holdings Ltd in China is not expected to pose any material impact on the overall property market activity and prices in Malaysia,” it said.
The Chinese property developer’s comments came after it missed two dollar coupon payments this month totaling $22.5 million, fuelling fears that the country’s property debt crisis could hamper a broader economic recovery and spill overseas.
Country Garden is building its largest overseas development, the massive Forest City project, across four reclaimed islands in the southern Malaysian state of Johor bordering the wealthy city state of Singapore.
But the project, now home to about 9,000 people, has faced challenges since its 2016 launch, seeing demand fall sharply following China’s move to stem capital outflows and the COVID-19 pandemic.
Last week Malaysian Prime Minister Anwar Ibrahim said the project would be designated a “special financial zone” to attract investment, and help cut the cost of doing business there.
(Reporting by Yantoultra Ngui; Editing by Clarence Fernandez)
