Tuesday, September 28, 2021
HomeUncategorizedChinese property giant Evergrande under 'tremendous pressure'

Chinese property giant Evergrande under ‘tremendous pressure’


The anxious investors crowded in front of the building’s entrance as police with riot shields were deployed to maintain order, according to AFP reporters at the scene.

“Our boss is owed over 20 million yuan (US$3.1 million), and many people here are owed even more,” one man who gave his surname as Cheng told AFP.

“We are definitely very anxious. There’s no clear explanation right now … they should have paid the money when it was due.”

Another man outside the headquarters said his firm was a supplier to Evergrande, and is owed more than 30 million yuan (US$4.6 million).

He said he had previously been offered repayment in the form of property by the group, but they failed to reach agreement on this offer.

“My family has also been threatened … Evergrande employees in my hometown warned my mother to tell me to stop causing trouble and come home,” he said.


Evergrande was downgraded by two credit rating agencies last week while its shares tumbled below their 2009 listing price, with a barrage of bad headlines and speculation of its imminent collapse on Chinese social media.

On Monday, the company insisted it will avoid bankruptcy.

But on Tuesday, it issued another statement to the Hong Kong stock exchange, saying it had hired financial advisers to explore “all feasible solutions” to ease its cash crunch.

The statement warned that there was no guarantee Evergrande would meet its financial obligations.

The firm blamed “ongoing negative media reports” for damaging sales in the pivotal September period, “resulting in the continuous deterioration of cash collection by the Group which would in turn place tremendous pressure on … cashflow and liquidity”.

Shares in the firm fell more than 11 per cent Tuesday, and are down almost 80 per cent since the start of the year.

The firm has some 1.4 million properties that it has committed to complete – around 1.3 trillion yuan (US$200 billion) in pre-sale liabilities, as of the end of June, according to an estimate by Capital Economics.

Evergrande did not respond to a request from AFP for comment.


“Evergrande’s collapse would be the biggest test that China’s financial system has faced in years,” said Mark Williams, chief Asia economist at Capital Economics.

Yet “markets don’t seem concerned about the potential for financial contagion at the moment”, he said, adding “that would change in the event of large-scale default”, which would likely prod the central bank to step in and buttress the teetering developer.

“The most likely endgame is now a managed restructuring in which other developers take over Evergrande’s uncompleted projects in exchange for a share of its land bank.”

The pictures of angry investors outside the firm’s headquarters could also cause alarm in Beijing, where leaders are keen to keep a lid on any form of social unrest.

Evergrande has already sold stakes in some of its wide-ranging assets and offered steep discounts to offload apartments, but still reported a 29 per cent slide in profit for the first half of the year.

The developer was founded in 1996 by Xu Jiayin, who went on to become China’s richest man during the country’s property boom of the 1990s.

He poured money into mass developments in new cities, raising US$9 billion in Evergrande’s 2009 IPO in Hong Kong.

A year later, Xu bought a struggling football team and renamed it Guangzhou Evergrande, lavishing millions of dollars on salaries for its stars.

Evergrande started to falter under the new “three red lines” imposed on developers in a state crackdown in August 2020 – forcing the group to offload properties at increasingly steep discounts.





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