Protests erupt as Evergrande, a Chinese real estate conglomerate, comes under ‘extreme pressure.’

0

Protests erupt as Evergrande, a Chinese real estate conglomerate, comes under ‘extreme pressure.’

Hundreds of worried investors demonstrated outside Evergrande’s offices on Tuesday, after the debt-ridden corporation said it was under “tremendous strain” and may not be able to satisfy its repayment obligations.

The predicament of Evergrande has sparked fears of a contagion across China’s debt-ridden property sector, which accounts for more than a quarter of the world’s second-largest economy, with ramifications for banks and investors.

After years of borrowing to fund fast growth, the Hong Kong-listed developer is buried by a mound of liabilities totaling more than $300 billion.

A crowd of 60 to 70 protesters gathered outside Evergrande’s headquarters in Shenzhen, in the southern Chinese metropolis, demanding answers.

According to AFP reporters on the scene, the worried investors gathered in front of the building’s entrance as police were dispatched to keep calm.

“Our boss is owing more than 20 million yuan ($3.1 million), and many individuals here are owed even more,” a guy named Chen told AFP.

“We are unquestionably worried. Right now, there’s no clear explanation… They were supposed to pay the money when it was due.”

Evergrande was downgraded by two credit rating agencies last week, and its stock fell below its 2009 IPO price amid a torrent of negative stories and conjecture on Chinese social media about its impending demise.

The business vowed on Monday that it would avoid bankruptcy.

However, it sent a new statement to the Hong Kong stock exchange on Tuesday, stating that it has hired financial experts to look into “all conceivable measures” to help it get out of its liquidity constraint.

Evergrande’s financial commitments were not guaranteed, according to the statement.

The company blamed sales declines in the crucial September period on “ongoing negative media stories,” which resulted in “further worsening of cash collection by the Group, placing severe pressure on… cashflow and liquidity.”

The company’s stock dropped more than 11% on Tuesday, and it has lost about 80% of its value since the beginning of the year.

According to Capital Economics, the company has pledged to complete 1.4 million properties, totaling roughly 1.3 trillion yuan ($200 billion) in pre-sale liabilities as of the end of June.

“The collapse of Evergrande would be the most significant test that China’s financial system has faced in years,” said Mark Williams, Capital Economics’ chief Asia economist.

However, “markets do not appear to be concerned about the potential for financial contagion at the moment,” he added, adding that “that would change in.” Brief News from Washington Newsday.

Share.

Comments are closed.