China’s Fragile Housing Giant, Evergrande
Evergrande, one of China’s largest private companies and the world’s most indebted property developer, is on the verge of bankruptcy following years of fast expansion and a buying frenzy.
The company’s Hong Kong-listed shares have plummeted this year due to rising concerns about its financial health.
The company, which claims to employ 200,000 people and indirectly produce 3.8 million employment in China, has stated that it is attempting to avoid bankruptcy, which would have huge ramifications for the country’s economy, as well as the rest of the world.
Here’s everything we know about Evergrande so far.
Evergrande is one of China’s largest private corporations and one of the country’s top real estate developers, with a presence in over 280 locations.
As China’s economy opened up, the corporation accumulated fortune during decades of fast property expansion and wealth creation.
Xu Jiayin, also known as Hui Ka Yan in Cantonese, was formerly China’s richest man, but his fortune has plummeted from $43 billion in 2017 to less than $9 billion presently.
While the company is primarily a real estate enterprise, it has recently embarked on a full-fledged diversification strategy.
Outside of property development, Guangzhou FC, formerly Guangzhou Evergrande, is now the most well-known football team in China.
With its Evergrande Spring brand, the company is also a player in the booming mineral water and food markets. It has also constructed children’s amusement parks that it claims are “larger” than Disney’s.
In addition to tourism, Evergrande has made investments in digital operations, insurance, and health.
Some investments have fared better than others. Its electric car company, Evergrande Auto, which was launched in 2019, is presently not selling any vehicles.
In a nutshell, debt.
Evergrande has increased its acquisitions in recent years, capitalizing on the real estate boom.
The company announced earlier this month that its overall obligations had risen to 1.97 trillion yuan ($305 billion) and warned of “risks of borrowing defaults.”
Moody’s downgraded its strength rating to “negative” in August, citing concerns about repayment capacity, and Fitch and Standard & Poor’s have subsequently followed suit.
Evergrande’s stock has dropped by almost 80% since the beginning of the year, and several contractors and suppliers have complained about not being paid on time, while creditors have demanded prompt repayment of loans.
Last year, a leaked letter from Xu asking regulators for approval to restructure caused market panic — while Evergrande was unaffected. Brief News from Washington Newsday.