Forest City’s future uncertain amid Chinese property giant’s financial struggles
Forest City, the Malaysian island megaproject backed by Chinese investment, is facing an uncertain future due to the financial struggles of Chinese property giant Country Garden. The US$100 billion artificial city, which has been built in the middle of palm oil trees, remains largely vacant despite being aimed at middle-class Chinese buyers. The project, which includes condos, roads and shops, has faced numerous challenges, including low sales, Chinese currency controls, a pandemic shutdown and public anger at China’s growing influence in Malaysia.
Country Garden, the project developer, is currently dealing with a US$196 billion debt. Despite posting a record loss for the first half of 2023, it has received approval from creditors to extend a key bond repayment deadline, avoiding a potential default. However, another deadline is approaching for an unpaid multi-million dollar interest payment, placing the company at risk of default again.
Forest City has a current population of around 9,000, far short of its 700,000 target. The city, which is located across from Singapore in Johor state, is one of several ambitious projects by Country Garden. The company rose from humble beginnings to become Beijing’s largest private real estate firm, but its high-risk strategies have led to its current financial difficulties, reported Bangkok Post.
The future of Forest City is now under scrutiny. Many of the properties are owned by absent owners, who use them as a safe place to store their money. The city’s high-rise towers are largely unoccupied, and many of the shopfronts are shuttered, with court documents demanding outstanding payments stuck to the doors.
Last week, Malaysian Prime Minister Anwar Ibrahim announced the creation of a special financial zone to save Forest City. The zone will offer incentives such as a special income tax rate and multiple entry visas. However, observers believe that the project faces a challenging future.
Forest City, which is a three-hour drive from Kuala Lumpur, mainly attracts visitors who are interested in its futuristic towers or who want to buy duty-free alcohol. The city is primarily maintained by foreign workers from Nepal and Bangladesh. Meanwhile, Country Garden is fighting for its survival, and significant efforts will likely be needed from both Beijing and Kuala Lumpur to ensure the success of Forest City.
One visitor said they were enticed by its appearance online, but wouldn’t stay long term.
“I came here for a holiday after seeing TikTok videos. If you ask me if I would live here, the answer is no.”
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