Thread by @JChengWSJ

To grasp Evergrande's troubles, we went to Lu'an, a poor city of 4 million that has lost 5% of its population in the past decade. Over that time, Evergrande poured $10B+ into apartment blocks, an EV plant and a “Fairyland” theme park.
@Kubota_Yoko @QiLiyan
on.wsj.com/3AbJzFR

@Kubota_Yoko @QiLiyan Now, rows of residential towers, some 26 stories high, stand unfinished, plastic tarps flapping in the wind—not far from the golden Pegasus statues guarding the uncompleted $9B theme park that was to be bigger than Disneyland and the planned $4B EV plant.
on.wsj.com/3AbJzFR

@Kubota_Yoko @QiLiyan “We spent all our family’s savings on this apartment,” said one 59-year-old woman, who paid roughly $138,000 for an Evergrande unit in August. Now, work has stopped, and nobody knows when—or if—it would restart. “We really don’t know what to do.”
on.wsj.com/3AbJzFR

@Kubota_Yoko @QiLiyan With limited power to tax, Chinese municipalities get roughly one-third of their revenue from selling land to property developers like Evergrande. Lu’an’s take from land sales totaled $1.2B in the first half of 2021, versus total tax revenue of $900M.
on.wsj.com/3AbJzFR

@Kubota_Yoko @QiLiyan Property construction in smaller cities ran well ahead of demand over the past five years in China, leaving the market increasingly dependent on speculators and investors. Some 21% of homes in urban China—65 million empty units—were already vacant in 2017.
on.wsj.com/3AbJzFR

@Kubota_Yoko @QiLiyan Cities like Shanghai kept a tight grip on land supply, so Evergrande turned to out-of-the-way places like Lu’an, which transformed into a 6,000-square mile urban sprawl, with housing blocks surrounded by farmland. New York City is about 300 square miles.
on.wsj.com/3AbJzFR

@Kubota_Yoko @QiLiyan Evergrande faced cash crunches over the years but always overcame them. Then Beijing announced plans in August 2020 to crack down on developers’ borrowing with limits that kept the company from taking on new debt. For Lu'an, that spelled trouble.
on.wsj.com/3AbJzFR

@Kubota_Yoko @QiLiyan The story is front and center on Tuesday's @WSJ front page.
@Kubota_Yoko @QiLiyan @yifanxie @wsjeva @patrick1barta @SofiaMcFarland @raulariano1
on.wsj.com/3AbJzFR

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