Courtesy of Bloomberg, a report on Malaysia’s controversial Forest City which now faces questions over the financial health of its developer, the Chinese giant Country Garden:

Drive a few more minutes, and you’re among the rows of white towers lining the city’s mostly deserted streets. Groundskeepers in wide-brimmed hats saunter up and down the empty sidewalks, tending immaculate foliage. Guards in red berets lounge at security checkpoints, monitoring the trickle of cars. Few of the city’s 9,000 residents are within sight. This isn’t necessarily unusual for Malaysia, where many people avoid the outdoors during the afternoon heat. But Forest City was built to have more than 10 times as many occupants.

In a history spanning just less than a decade, this private town across the bay from Singapore has already muddled through many challenges—regulatory issues, political resistance, a global pandemic. Just as it comes through Covid-19, it risks getting caught in the downdraft of China’s rapidly cooling real estate market.

Forest City’s China-based developer, Country Garden Holdings Co., rejects suggestions the project is imperiled and says it’s finally poised to blossom. But the financial problems facing Country Garden and other indebted Chinese developers have raised fears of a broader crisis that would take a big chunk of the world’s second-largest economy with it, leaving Forest City with an uncertain future.

Countless luxury real estate complexes dot the coastlines of Southeast Asia, but Forest City stands out for its scale and audaciousness. Country Garden’s vision was to build four artificial islands in the narrow strait between Malaysia and Singapore, then develop an eco-friendly city that would draw an international and affluent citizenry. It would take a few decades to build, cost billions upon billions of dollars and eventually hold 700,000 residents. If Country Garden realizes its stated plans, Forest City will be about half the size of Manhattan in terms of both landmass and population.

In the developer’s conception, Forest City’s residents would be people looking for a second home, a place to park money or both. The city’s appeal relied on Malaysia’s perennially warm weather, comparatively cheap living costs and proximity to Singapore, with many other Asian metropolises just a short flight away.

Country Garden kicked off the land reclamation in early 2014. Before long, the developer began flying in potential buyers, mostly from China. Many purchased condos in high-rises still under construction, a common practice at the height of China’s real estate boom. A two-bedroom apartment could go for about $165,000. That’s steep for the typical Malaysian household, which brings in around $16,400 a year. But it’s cheap compared with Shanghai or Beijing.

Just six months in, Country Garden paused its island building after Malaysian regulators said the company hadn’t properly studied the environmental effects of the project. Then Singapore’s government complained to Malaysian officials that it hadn’t been informed and expressed concern about Forest City’s possible impact on its nearby border.

In 2018, Malaysia’s then-Prime Minister Mahathir Mohamad criticized the development as being “built for foreigners” and financially out of reach for most people in the country. “They can buy the property, but we won’t give them a visa to come and live here,” he said at the time, according to local news reports. This prompted Country Garden to begin talks with the government about how to build some homes tailored for Malaysians.

Country Garden’s plans were also complicated by the Chinese government’s crackdown on citizens seeking to purchase real estate abroad. For some who’d already bought Forest City condos, that sparked fear the project, given its apparent focus on Chinese customers, would fail.

Then Covid ground everything to a halt. Country Garden pulled workers, and Forest City’s smattering of foreign residents largely decamped.

This year, with pandemic travel restrictions lifted, it seemed Forest City finally would catch a break. But Country Garden missed coupon payments on two dollar-denominated bonds in early August. China’s economy has already been rattled by developers struggling with heavy debt loads, leaving many observers on edge about a broader meltdown in real estate. Country Garden’s size—it was once China’s biggest real estate developer and has 3,000 housing projects—raised fears that a crisis at the company could quickly spread through the economy.

Despite everything, Country Garden says Forest City isn’t in trouble. “We don’t think this project is unsuccessful,” says Syarul Izam Sarifudin, a Country Garden executive. So far the developer has built one of the four planned islands and enough high-rises and bungalows to house about 100,000 people—all at breakneck speed. “Where else can you find a major development consisting of 700 acres completed in seven years?” Syarul says.

His colleague Qiu Lipeng, regional vice president of Country Garden, says 80% of the island’s 26,000 residential units have been sold, and notes the development has generated many jobs in the area. “Success,” says Qiu, “has many meanings.”

Edward Glickman, a former professor at New York University’s business school who now consults for institutional investors, says that the city’s 80% sale rate is a solid interim achievement, but that Forest City must also account for steep land reclamation costs that most comparable developments don’t. Qiu declines to address specifics about its finances, and there’s no publicly available information that would make it possible to assess its performance independently.

Forest City also hasn’t yet proved it can become an actual community. Syarul says people from 38 countries own property here, most of them Chinese citizens. But owning property somewhere is different from living there, and people with enough money to buy condos abroad are probably more likely to be absentee owners than those who own only their primary residence.

One key draw has been the 2018 opening of a branch of Shattuck-St. Mary’s, part of the prestigious boarding school whose main location is in Minnesota. Serina Rahman, who teaches environmental politics at National University of Singapore and runs a citizen science center in Forest City, says the school, for now, is the town’s beating heart. “And it’s really powerful in getting new residents,” she says. About 200 students go there, and annual tuition runs as high as $36,000.

In the near term, Qiu says Country Garden will focus on bringing businesses into the industrial park it’s built on the mainland just north of Forest City; for now it appears sparsely populated. He also points to the success of the golf resort Country Garden has built a short drive farther inland, with two 18-hole courses. It draws about 75,000 visitors annually, Qiu says.

If overseas buyers stop coming, locals are unlikely to purchase apartments in their place, says Muhammad Najib Razali, an associate professor at Malaysia’s University of Technology who focuses on real estate. The average Malaysian property transaction in 2022 amounted to around 450,000 ringgits ($97,000), enough to buy only the smallest units currently for sale at Forest City. If prices were lowered, though, it’d cast further doubt on Country Garden’s ability to recoup its investment.

Some real estate agents say Forest City will gradually draw people from Singapore looking for cheaper rents. Since pandemic restrictions were lifted, the city has seen a growing stream of Singaporean and local visitors. In August, Malaysian Prime Minister Anwar Ibrahim said Forest City will be designated a special financial zone, giving residents a raft of benefits, including multiple-entry visas and fast-track access for skilled workers commuting to Singapore, and a flat income tax rate of 15% for knowledge workers.

One day in June, a porter at Forest City’s 283-room Marina Hotel leaned on his concierge lectern. A big group of Chinese visitors who’d kept everyone busy for a few days had departed that morning, and the stately entrance hall was now quiet. He’d welcomed about 20 guests so far today, he said.

In the shopping mall down the street, a trickle of people shuffled past mostly empty storefronts to reach one hosting the only type of retailer thriving here: tax-free liquor stores. It’s one of a handful of tax breaks Forest City enjoys, and it’s a big draw in a country that has among the world’s highest alcohol duties.

As dusk settled on Forest City, the oceanfront promenade began to buzz with life. Groups of migrant workers—security guards, groundskeepers, construction workers—lounged on benches and watched Singapore’s glittering lights across the bay. Bottles of liquor traded hands. Cigarettes glowed in the dark. Chatter in Bengali, Hindi and Indonesian floated through the air.

Some of the beachgoers said they lived in Forest City. An Indonesian woman showed off pictures of her pad in the middle of this jungle of green and concrete. Two Indian bricklayers said they resided in a nearby high-rise. A Bangladeshi who had lugged three cases of Guinness from the duty free that afternoon said he lived just a few buildings down from them.

Many in this international crowd had been here for years, even through the pandemic; living, working and breathing life into this city that Country Garden’s former chairman once called “a desired living paradise.”