China Country Park is facing a termination petition in Hong Kong

Country Garden, China's largest real estate developer through 2022, said on Wednesday that a creditor has asked a Hong Kong court to liquidate its operations and repay lenders, the latest sign that China's housing crisis continues unabated.

Ever Credit, a Hong Kong lending company, has petitioned the city's High Court to shut down Country Garden. The court filing includes Country Garden's failure to repay a $204 million loan plus interest owed to Ever Credit, the property developer told the Hong Kong stock market.

Ever Credit's petition, known as a liquidation petition, aims to force Country Garden to close its doors and sell its assets to earn money it can use to repay its creditors. The move followed the Supreme Court's order last month to liquidate China Evergrande. Country Garden overtook Evergrande as China's largest developer in 2021 when Evergrande suffered a financial collapse.

Country Garden said it would fight the court's petition “vigorously” and that the first hearing on the petition was scheduled for May 17.

More than 50 Chinese real estate developers have defaulted on their debts since 2021. They have refused to pay their debts to foreign creditors while still making arrangements with Chinese banks for possible eventual repayment.

Many of these developers have shares listed on the Hong Kong stock exchange or have borrowed there, or both. But creditors face formidable hurdles as they seek to recover loans from Chinese property developers by filing petitions with Hong Kong's court system, said Zerlina Zeng, head of East Asia corporate credit at CreditSights, a global credit research firm.

Most Chinese developers' assets are in mainland China, where liquidation orders from Hong Kong may not be recognized by the courts. Even if mainland courts order developer buildings to be liquidated, China's strict restrictions on moving money out of the mainland could make it difficult for creditors to get their hands on the proceeds from those sales.

“We do not believe that a liquidation order will succeed in improving the recovery rate” of debt repayments, Ms. Zeng said.

Country Garden essentially ran out of money in October to pay off debt. Households in China have sharply reduced their purchases of apartments from private developers such as Country Garden, with housing prices falling sharply over the past two years.

Without cash from ongoing sales, developers have been unable to finish building the millions of apartments they have previously sold to buyers across China. Last month, Nomura Securities in Japan estimated that 20 million pre-sold homes were awaiting completion in China, and would require $450 billion to complete.

Real estate developers in China have for many years relied on selling apartments before they are built, then using the cash to finish other apartments that had previously been promised to other buyers. But this financial model collapsed as families retreated from dealing with private developers who had difficulty closing previous deals.

Pre-sales of unfinished apartments in Country Garden fell by 74 percent in the second half of last year compared to the same period in 2022. The overall problems for China's real estate industry are worsening this year, with preliminary data showing that sales fell by another 40 percent during the lunar year. New holiday this month compared to the same holiday last year.

Mainland China is not the only one experiencing real estate problems at the moment, it has also spread to Hong Kong. Paul Chan, the city's financial secretary, said Wednesday in his annual budget speech that he would scrap measures previously aimed at curbing speculation in Hong Kong apartments.