![]() ![]() Last week, the group said its total liabilities had swelled to 1.97tn yuan ($305bn) and warned of risks of defaults on borrowings. The move came a day after Moody’s slashed its rating, indicating it is “likely in, or very near, default”, while Goldman Sachs has cut the stock from neutral to sell. “We believe credit risk is high given tight liquidity, declining contracted sales, pressure to address delayed payments to suppliers and contractors, and limited progress on asset disposals,” said a Fitch Ratings statement. Those worries were increased on Wednesday when Fitch cut its rating on Evergrande to CC, reflecting its view that “a default of some kind appears probable”. Investors fear that if Evergrande is allowed to go under, indebted rivals such as Fantasia could quickly follow. ![]() Its debts to all manner of companies throughout China means that any default could trigger a knock-on effect for the country’s real estate sector, which has been pumped up by ultra-cheap money since the global financial crisis in 2008-09. Many analysts warn such an event could have a serious impact on the world’s number two economy because the firm would go under, leaving hundreds of firms out of pocket.Įvergrande is China’s second biggest property developer and has interests in hundreds of cities, specialising in the vast apartment complexes that have sprung up across China in the past 25 years. The assault intensified on Thursday, after Chinese authorities told gaming firms to curb “incorrect tendencies” such as focusing “only on money” and “only on traffic”, sending the Hong Kong stock market down 2.3%, its biggest one-day percentage drop since July.īut whether the president would allow Evergrande to go bust if it fails to meet key repayment deadlines on 21 September remains unclear. Xi Jinping, China’s president, has targeted “unsustainable” economic growth in recent months, along with his drive against the country’s increasingly powerful tech billionaires. On Tuesday, a stock exchange filing showed that Evergrande had outstanding liabilities worth 562m yuan ($87m) to a supplier called Skshu Paint and repaid some of the money in the form of apartments in three unfinished property projects. “There is a lack of confidence and lots of rumours, the key is that we still don’t see a clear plan,” a stock exchange trader told Reuters. Investors questioned how Evergrande was going to dispose of assets in order to repay debts without a clear plan. Along with Beijing’s tougher regulation, these factors have made it much harder for Evergrande to dispose of unsold properties even with huge discounts. ![]() The value of new home sales has fallen 20% in China since the peak in the first three months of this year, and the value of land sales are also sharply down. The company has run up liabilities totalling more than $300bn, after years of borrowing to fund rapid growth and a string of real estate acquisitions as well as other assets including a Chinese football team.īut the firm has struggled to service its debts and a crackdown on the property sector by Beijing has made it even harder to raise cash, fuelling concerns it will go bankrupt. ![]() Evergrande claims to employ 200,000 people and indirectly generate 3.8 million jobs in China. There were also reports from China on Wednesday of employees protesting outside the company’s offices about salaries not being paid. China Evergrande Property: 3.41 -8.09% /c5P4qWARst- IGSquawk September 9, 2021 ![]()
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