China Evergrande debt crisis is worrying investors. Why, and what’s happening?
Global News
Evergrande is China’s second-largest property developer with US$110 billion in sales last year, US$355 billion in assets, and over 1,300 developments nationwide.
China Evergrande Group has missed a dollar bond interest payment deadline, moving closer to a potential default and fuelling worries about a collapse that could send shockwaves through China’s economy and beyond.
Chairman Hui Ka Yan founded Evergrande in Guangzhou in 1996. It is China’s second-largest property developer with US$110 billion in sales last year, US$355 billion in assets, and over 1,300 developments nationwide. It listed in Hong Kong in 2009.
Evergrande grew rapidly through a loan-supported land-buying spree and selling apartments quickly at low margins. It has 200,000 staff and hires 3.8 million annually for developments.
Slowing growth has seen it branch into businesses such as insurance, bottled water, football and electric vehicles (EVs).
In September last year, a leaked letter showed Evergrande pleading for government support to approve a now-dropped backdoor stock market listing. Sources told Reuters the letter was authentic; Evergrande called it fake.
In June, Evergrande said it did not pay some commercial paper on time, and in July a court froze a US$20 million bank deposit held by the firm at the bank’s request.
The firm in late August said construction at some of its developments had halted due to missed payments to contractors and suppliers. Sources have told Reuters that it also missed payments to bank and trust loans in the past few weeks.
Liabilities, including payables, total 1.97 trillion yuan (US$306.3 billion) – about two per cent of China’s gross domestic product.
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