[New Tang Dynasty Beijing time August 28, 2021]The debt crisis of China’s second largest real estate developer Evergrande Group is causing great concern in the Chinese society. At present, Evergrande’s creditors, investors, suppliers and banks are helpless in the face of Evergrande’s plight, and a series of crisis handling procedures are quietly unfolding.
Reuters said that there are clear signs that all levels of the Chinese Communist Party are taking actions to try to avoid the serious consequences of a hard landing of Evergrande Group. They are very worried that Evergrande’s bankruptcy may trigger in China’s financial system. chain reaction.
Reuters quoted Lu Ting, chief Chinese economist at Nomura Securities, as saying, “Hengda’s huge balance sheet will have a real domino effect in China,” “If financial institutions lose money (severely), they will tighten. Lending to other companies and industries.”
According to public data from the Chinese Communist Party, Evergrande’s total debt last year was 1.95 trillion yuan (the same hereinafter), which exceeded the annual GDP of Finland. Among the 1.95 trillion yuan in debt, interest-bearing liabilities amount to more than 800 billion yuan. On August 25, Evergrande released its latest financial report, showing a total loss of more than 8 billion yuan in the real estate and automobile business in the first half of the year.
It is reported in China that the Guangdong Provincial Government, where Evergrande Group is located, began to consult with Evergrande’s major bond banks last week to study whether it is necessary to establish a creditor committee of Evergrande Group to make necessary preparations for Evergrande’s bankruptcy.
There is also news that the Guangdong government has also asked Guangzhou Yuexiu Group to suspend the acquisition of Evergrande’s Hong Kong headquarters in Wanchai, Hong Kong (China Evergrande Center). The main business of Yuexiu Group spans multiple industries such as finance, real estate, transportation infrastructure, and food.
According to Reuters, people familiar with the matter disclosed that the relevant banks have been instructed by their superiors to extend Evergrande’s maturity loans. Relevant regulatory agencies have designated a court in Guangdong to handle legal litigation cases involving Evergrande Group in various parts of the country. These signs clearly indicate that the central government is in the middle of coordination and is doing its best to reduce the possible social impact of Evergrande’s debt crisis.
Evergrande Group has 200,000 employees and provides 38 million job opportunities across the country. The collapse of Evergrande will not only cause severe damage to the banking and financial system, but also have a huge impact on China’s job market.
How did Evergrande’s debt crisis come about? A report published by “Sina Finance” on the 27th believed that the fundamental reason was its “strong financing ability.” This ability supports Evergrande to burn money faster and faster, until China’s regulatory risks have undergone a major change in recent years, and real estate companies that have crossed the red line set by the regulatory authorities are disqualified from obtaining new loans. Unfortunately, three of the country’s 12 key real estate companies have stepped on the red line, and Evergrande is one of them. Once the ability to continue large-scale financing is lost, Evergrande’s debt problems will be exposed to the public.
Analysts said that the problem that makes the Chinese Communist government feel very difficult is that Evergrande, a real estate giant that used to be “not bad”, has such a huge debt that it is truly “too big to fail”. If this crisis is handled carelessly, triggering a systemic financial crisis, it will deal a devastating blow to the CCP, which is currently in domestic and foreign difficulties.
(Transfer from Voice of America/Editor: Wen Hui)
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