Chinese real estate developer Evergrande’s debt default risk has once again turned around. After the media disclosed that Evergrande had recently repaid interest on some overdue US dollar debts, there was news that the Chinese authorities are planning to relax restrictions on financing for real estate developers. Many financial scholars believe that the authorities have promoted strict housing market control policies, but at present they have to loosen the “release of water” in order to avoid unfinished projects.
According to a press release issued by the German data service agency DMSA on Wednesday (10th), Evergrande has defaulted on two bond interest payments of approximately US$128 million since September this year, and its 30-day grace period ended earlier in October. However, during the period, the market was misled by the rumors that Evergrande had paid interest, and “in fact, Evergrande has not paid interest.”
The DMSA also stated that Evergrande originally had to pay creditors on three additional bonds with a total value of approximately US$148 million. However, the 30-day grace period passed on Wednesday (10th). “The company has not received any Interest, so Evergrande has triggered default.” And Evergrande’s 23 outstanding bonds all have cross-default clauses, which means that as long as one of them defaults, the remaining outstanding bonds will automatically be in “default” status. The press release revealed that relevant companies are applying for bankruptcy to Evergrande and warned Evergrande, as one of the world‘s most indebted companies, that if bankruptcy may trigger a “mass reset”, it will eventually lead to the collapse of the global financial system.
Foreign media: The customer has received the interest paid by Evergrande on three overdue US dollar bonds
On Thursday (11th), the day after the above-mentioned news came out, Bloomberg and Reuters reported that customers had received interest paid by Evergrande on three overdue US dollar bonds. After repaying the interest, Evergrande once again avoided defaulting on the debt. As of Thursday (11th), Evergrande has not defaulted on a publicly issued dollar bond.
At the end of last year, China stepped up efforts to rectify the housing market, implemented the “three red lines” new policy, and restricted the financing lines of real estate developers. The authorities’ move is accused of weakening the ability of real estate companies such as Evergrande to sell assets to repay debts. And many companies such as Kaisa Group also broke out a crisis of default. Under the current dire situation of Evergrande, the outside world is concerned about whether the government’s financing policy will be shaken.
Scholar: The Chinese government does not want real estate companies to rely on borrowing to “extend their lives”
The commander of Chinese financial scholars told this station that the Chinese government still does not want real estate companies to return to the old path and rely on borrowing to “extend their lives.”
The commander said: “If you borrow money, you can’t borrow much, because you have lost your credit. The Chinese government does not want real estate developers to borrow to “renew their lives”, but will require them to sell assets and realize asset reorganization. The Chinese government may also be possible. Let local judicial and regulatory agencies apply for asset protection for (Hengda).”
Recently, it has been repeatedly reported that Evergrande has sold assets, including the pro-Beijing media “Hong Kong 01” reported on Wednesday (10th) that after investigation, it was discovered that Evergrande Chairman Xu Jiayin had pledged a second mountaintop cloth trail with a market value of approximately HK$800 million from a finance company. Da Zhai; Described that this is the first time that Xu Jiayin has used his personal property to save Evergrande. In addition, on November 8, Evergrande once again reduced its holdings in Hengteng Networks, cashing out more than 400 million yuan.
Foreign media: Chinese regulators are considering relaxing regulations to take over assets
The Wall Street Journal cited news on Thursday (11) that Chinese regulators are considering relaxing regulations to allow troubled real estate developers to allow buyers, including state-owned enterprises, to prevent project-related debts from affecting their debt ratios. Take over assets in exchange for more liquidity.
At the same time, many Chinese state media cited the latest data from the central bank to emphasize that in October, the growth rate of credit cooperative financing “stabilized”, personal housing loans increased by 100 billion yuan from the previous month, residents’ willingness to buy houses increased, and local housing companies would loosen restrictions on purchases and sales. .
In this regard, Chinese independent financial scholar Gong Shengli analyzed to this station that the authorities must ensure that the current real estate projects are not “unfinished”, “if it is built, someone can buy it, and then it can continue to run.”
Gong Shengli said: “It is necessary for real estate developers to complete their projects. No matter how high the building is, it can usually be completed in half a year to a year and become a commodity business. The Chinese government has always been to protect this matter, because it is related to whether the industry can continue. The problem of going forward is that the project under construction should not die once. The key is not to rot. Build it well, have property rights, invest, and sell it cheaply to make money.”
Evergrande has a debt of at least about 2 trillion yuan
In the past, the Chinese government has remained silent when facing the debt crisis of Evergrande. Gong Shengli pointed out that Evergrande’s debt is at least as high as about 2 trillion yuan (RMB, the same below), which is a “hot potato” for local governments and even the central government. Construction-related industries account for at least 30% of the government’s economic output. However, as the government suppresses the housing market and reduces financial income, “everyone dares not save it.”
Gong Shengli said: “The tax revenue of the Guangzhou Municipal Government is only a few hundred billion yuan, which is simply not repayable. The Guangdong Provincial Government has a GDP of 12 trillion yuan this year. The total revenue of the central government in 2020 will be only 15 trillion yuan. If Evergrande is saved, the entire real estate industry will also be saved. The entire debt will exceed 16 trillion yuan. The Chinese government is very difficult to save. The precedent cannot be set. What should I do if it saves other companies? I think Evergrande is about to end.”
Gong Shengli pointed out that China is now facing a decline in the number of births, the number of marriages, and the economic downturn. In the future, the number of people who have the ability and demand to buy houses or the market is saturated. In addition, the authorities are in a dilemma in dealing with the real estate industry. He is not optimistic about the resolution of the crisis. “It will take a very long time and it will test how the government handles the deep and fundamental problems of the housing industry.”
Reporter: Li Zhizhi, editor in charge: Luo Yanyun, He Ping, web editor: Ruizhe