Evergrande is not bust, at least not yet. But it looks close to reaching the point of no return – creditors are howling, rating agencies downgrading as fast as they can, and even the company is admitting it might not survive | ✍️ @HoskingTheTimes
thetimes.co.uk/article/evergr…
thetimes.co.uk/article/evergr…
What is Evergrande, and what’s the problem?
Evergrande is China’s largest property developer that has built millions of apartments by borrowing money. Interest payments are due on debts estimated at £220 billion, and it appears unable to pay them.
Evergrande is China’s largest property developer that has built millions of apartments by borrowing money. Interest payments are due on debts estimated at £220 billion, and it appears unable to pay them.
How did this happen?
Rising prices caused a property bubble that may burst. Supply of apartments exceeds demand and many new apartment blocks stand empty. The government saw it coming and began a campaign against property speculation. This appears to have precipitated the crisis
Rising prices caused a property bubble that may burst. Supply of apartments exceeds demand and many new apartment blocks stand empty. The government saw it coming and began a campaign against property speculation. This appears to have precipitated the crisis
What does this mean for China?
The government faces a dilemma. It could simply order its state-owned banks to roll over Evergrande’s debts. But this would have the effect of rewarding irresponsible borrowing.
The government faces a dilemma. It could simply order its state-owned banks to roll over Evergrande’s debts. But this would have the effect of rewarding irresponsible borrowing.
More likely, it will allow the company to fail. This will be a disaster for Evergrande’s creditors, suppliers and employees, as well as the customers who have paid for 1.6 million unfinished apartments.
What about the rest of the world?
The fear of “contagion” beyond China to the world economy has already driven down share prices. Any slowdown in Chinese economic growth affects companies that export there, and Europe is more exposed than any other region
thetimes.co.uk/article/presid…
The fear of “contagion” beyond China to the world economy has already driven down share prices. Any slowdown in Chinese economic growth affects companies that export there, and Europe is more exposed than any other region
thetimes.co.uk/article/presid…
China is the world’s biggest consumer of raw materials, which makes the health of its construction sector particularly important for mining groups. With the prospect of its construction boom slowing, the price of metals has fallen, which has led to a sale of mining stocks.
Asian banks have also taken a hit as the market tries to work out which ones stand to lose if Evergrande cannot repay its loans.
There is also the house price issue: if prices fall, where does that leave banks that lent against homes at higher valuations?
thetimes.co.uk/article/how-ev…
There is also the house price issue: if prices fall, where does that leave banks that lent against homes at higher valuations?
thetimes.co.uk/article/how-ev…
Evergrande's founder has vowed to lead the company from financial ruin.
He wrote to his employees, “I believe, through joint endeavours and ardent struggles of managers at all levels and all employees, Evergrande will soon emerge from its darkest moments"
thetimes.co.uk/article/evergr…
He wrote to his employees, “I believe, through joint endeavours and ardent struggles of managers at all levels and all employees, Evergrande will soon emerge from its darkest moments"
thetimes.co.uk/article/evergr…
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