Status: 04.01.2022 2:42 p.m.
What exactly is going on at the Chinese real estate giant Evergrande remains in the dark. What is certain is that he is tottering. And that Beijing must intervene in an emergency to prevent worse.
Truly reliable news on the state of the Chinese real estate market and its major players is rare. The scattered numbers and detailed reports hardly allow deeper insights. What is certain for observers, however, is that a collapse of providers and prices would have fatal consequences for the economy in China and the world.
Evergrande wavers
It is also certain that Evergrande, the second largest real estate developer in the country, is in dire straits. Today the company announced that it would see a slump in sales in 2021. The contractual revenues have shrunk by 39 percent compared to the previous year. Trading in the stock in Hong Kong, which had been suspended yesterday without giving a reason, has since resumed – again without giving a reason.
Evergrande is apparently neither able to complete all of the promised houses and apartments, nor to properly service its debts. Just a week ago, the company let interest payments of $ 255 million expire. Today around 100 investors protested again in front of Evergrande offices in Guangzhou, demanding that their funds be returned. The total debt of the Shenzhen group is estimated at over $ 300 billion.
What is Beijing doing?
This means that the real estate giant, which is behind more than 1,300 real estate projects, is considered “too big to fail”, ie too big for the government to allow bankruptcy. The signals from Beijing, however, are ambiguous.
On the one hand, the leadership has allowed speculation about the state of the staggering giant and other real estate developers for months. As also became known yesterday, Evergrande has to demolish 39 high-rise buildings in the southern Chinese island province of Hainan by order of the authorities. According to media reports, the objects had been erected illegally.
On the other hand, the government already seems to be involved in the restructuring of Evergrande. The “Risk Committee” convened last year should also include state officials at the table, which experts interpret as intervention by the leadership to avert a collapse.
Politicians are also certainly aware of the risk of a conflagration on the property market. Most recently, on the occasion of declining investment in the housing market, President Xi Jinping announced that he would regulate the industry more closely in order to curb the excesses of recent years.