When the peak of Evergrande – a real estate investment brokerage group passed, only a huge debt of 300 billion USD remained. China’s economy is really “startled”.
When billionaire Hua Gia An founded Evergrande, many people did not think about the prospect of one day this stormy super company fell into the current situation. But, like so many warnings about a company growing “overheated” and mired in unresolvable problems, the Chinese government “lives in fear” of the consequences if companies The company’s collapse is still visible.
Over the past few months, Evergrande has been the real estate developer who received the “unhappy” title: The most indebted real estate company in the world. Regardless, they have been receiving continuous support. However, in recent weeks, consecutive bad signals have made the risk of collapse once again return to Evergrande.
“Evergrande default is possible,” Fitch Ratings said. As for Moody’s, Evergrande has run out of money and time. The company’s total debt has reached 300 billion USD, hundreds of projects are unfinished while suppliers and contractors close construction sites. Evergrande itself has also begun paying off past due bonds based on existing properties, even if they are incomplete.
Beijing used to allow government managers to commit to “removing and filtering” weak businesses, but do they really dare to “take down” with a “debt bomb?” as giant as Evergrande or not?.
How strong was Evergrande once?
Founder Xu Jiayin founded Evergrande in 1996 and it was the company that fueled China’s real estate boom during the late 1990s and early 2000s. such as bringing three-quarters of households into residential real estate, actively urbanizing rural areas and continuously expanding “area” to all parts of China. Evergrande has really become the “center” of power in China’s rapid economic development strategy, which takes the real estate market as the basis.
Founder and billionaire Hua Gia An also has close relationships with many famous politicians and businessmen. This is also a seemingly “infinite” source of money that helps Evergrande borrow easily to develop and expand into new business areas.
At its peak in the 2010s, Evergrande also entered the beverage, livestock, electric car market or even owned the best professional football team in China. But now Evergrande is a “horror” for Chinese banks with a huge amount of debt after most of the areas they developed were “broken”.
In recent years, the group has repeatedly encountered lawsuits from home buyers, mainly unfinished apartments despite long overdue. Suppliers and creditors have also demanded billions of dollars in payments from Evergrande, and many places have “frozen” the group’s projects.
The main reasons pushing Evergrande into the “deadline”
Evergrande had two big problems that they couldn’t solve.
Firstly, the source of loan capital has been blocked when over the years, Chinese regulators are continuously “aggressive” with investment activities that are considered “reckless” by companies, large corporation. Difficulty in money has led Evergrande to sell off some businesses or dissolve their team. In addition, Evergrande’s attempt to keep the electric car business in order to negotiate resale with a number of potential partners. But it seems that both sides are trying to wait for the value of the Evergrande electric car segment to “go as low as possible”.
Second, China’s real estate market has slowed down and the demand for new apartments has dropped significantly. Most of Evergrande’s cash comes from unfinished pre-sale apartments with nearly 800 projects underway across China and 1.2 million customers who have paid a down payment or a portion of the value. home. But completing projects is really difficult for Evergrande at the moment.
As a result, even though Evergrande has lowered the price of new apartments, buyers are still not interested in this group’s products. In August, this group’s home sales were only 1/4 of the previous year. last.
Will Evergrande receive “help” from Beijing?
If under the current situation, Beijing will probably resolutely exercise an “iron hand” and say no to Evergrande’s help, however, many experts say that, if Beijing allows Evergrande to collapse, it is very easy. causing serious damage when millions of customers, investors, contractors, banks will be affected when Evergrande defaults.
For decades, Beijing will still appear and find a way to rescue large corporations on the verge of collapse. But the world is different now, for the past few years, Beijing officials have taken a tough stance and are willing to let big companies collapse in order to limit unsustainable debt in the economy.
The prospect that a real estate conglomerate once will “disappear” is entirely possible.
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