Evergrande, the troubled Chinese real estate giant, has sparked concerns about the economy

Evergrande, the troubled Chinese real estate giant, has sparked concerns about the economy

Evergrande, the world’s most indebted real estate developer, has begun repaying investors in its wealth management business with property, as the company faces a major test this week.

Major banks have reportedly been notified they will not get interest payments on loans due Monday, while interest payments on the firm’s bonds of $84 million (£61 million) are due on Thursday. On Monday, the company’s stock dropped 15% in Hong Kong trading. The property mogul’s mounting debt woes have sparked concerns about the potential impact of its demise on China’s economy. Evergrande became one of China’s most valuable firms by borrowing more than $300 billion (£217 billion).

Beijing enacted new laws last year to regulate the amount due to large real estate developers. Evergrande was forced to offer its properties at deep discounts as a result of the new rules, in order to ensure that money was coming in to keep the company afloat.

Evergrande’s difficulties are critical for a number of reasons. To begin with, many people purchased property from Evergrande before construction began. They have made deposits and may lose their funds if the company fails. Companies that conduct business with Evergrande are also present. Construction and design firms, as well as material suppliers, are at risk of suffering significant losses, which could lead them to file for bankruptcy. The final point to consider is the possible impact on China’s financial system.

Because of the potentially catastrophic consequences of such a heavily leveraged corporation falling, some analysts believe Beijing may intervene to save it.

Hu Xijin, the influential editor-in-chief of the state-backed Global Times newspaper, wrote on China’s chat app and social media platform WeChat that Evergrande should not rely on a government bailout and instead must preserve itself.

Hui Ka Yan, a businessman from Guangzhou, formed Evergrande, formerly known as the Hengda Group, in 1996.

Evergrande Real Estate now owns over 1,300 projects in over 280 cities around China. The Evergrande Group has expanded to include far more than just real estate development. Its activities include wealth management, electric car production, and food and beverage manufacturing. It even owns Guangzhou FC, one of the country’s most popular football clubs. According to Forbes, Mr. Hui has a personal fortune of roughly $10.6 billion.

divya

Leave a Reply

Your email address will not be published.