Bloomberg reported on June 11 that the financial situation of China Evergrande Group once again aroused investor concerns, and Evergrande’s stock price continued to fall, reaching its lowest level since March. Since Evergrande’s subsidiaries failed to pay on time, bondholders eagerly withdrew, Evergrande Group’s bonds have plummeted in recent weeks.
After reaching an agreement with investors in September last year to avoid a liquidity crisis, Xu Jiayin’s net assets have fallen by one-third to around US$19 billion. According to the Bloomberg Billionaires Index, this is more than half the peak in 2020.
Bloomberg reported that the turmoil caused by Evergrande’s financial crisis may spread widely. Evergrande currently has 1.95 trillion yuan (US$305 billion) in debt, including US dollar debt held by investors in Hong Kong, London and New York. As a result, Evergrande has become the world‘s most indebted real estate company and one of China’s most systemically important borrowers.
If Xu Jiayin cannot restore investor confidence, Evergrande’s liquidity crisis may affect China’s financial system and other areas.
Evergrande’s risks have become very large. The Chinese Communist Party’s financial regulatory authorities have recently required Evergrande’s creditor banks to conduct a new round of stress tests on their debt exposure.
The last time this kind of news came out was on September 24, 2020, when a document was transmitted online stating that China Evergrande rescued the Guangdong Provincial Government, stating that if it fails to return to A, it may be in danger of the capital chain.
Lan Deng, a professor at the University of Michigan who studies real estate development in China and the United States, said in an email, “If Evergrande has trouble, it will obviously have a significant impact on the Chinese real estate market and the overall economy.”
Deng said, “Considering that the Chinese economy is so highly connected to real estate development, this will not only expose its creditors to greater financial risks, but it may also have a ripple effect in different sectors of the Chinese economy.”
Bloomberg reported that the price of Evergrande’s U.S. dollar bonds fell. U.S. dollar bonds due in 2025 had hit the lowest level since October last year.
Evergrande did not immediately respond to a request for comment on Thursday. Earlier this week, it promised to arrange for a “very small” amount of overdue commercial bills for its subsidiaries, and claimed that its financial business with Shengjing Bank was legal. Evergrande holds shares in Shengjing Bank.