![]() Among the top 50 developers, over half have asset-liability ratios higher than 70%. Most developers have been comfortable using credit to expand their business. The current Evergrande liquidity crisis is an indication of a wider and a more prevalent problem in the real estate sector. It is important to note that the boom and collapse of the real estate sector was precipitated by Chinese government policies. In the summer of 2021, the company ran into liquidity issues leading to credit downgrades and a default on December 7, with shares declining nearly 90% in value since December of 2020. Evergrande was also known as one of the most indebted real estate developers in China, boasting over $300 billion in liabilities. It boasts of creating and sustaining 3.8 million jobs a year and hosts over 200,000 employees, with more than 1,300 projects across 280 cities. Secondly, the real estate market is a lynchpin for local government financing, with land sales and bidding serving as the main source of capital for municipalities, who bear the spending mandates for most public services.Ĭhina Evergrande Group was the largest property developer by sales in 2020, with an annual revenue of 507 billion RMB ($79 billion) and total assets worth 2.3 trillion RMB ($358 billion) in 2020. For Chinese consumers, real estate is where they invest the bulk of their capital, which has alleviated the impact of China’s capital control policy on investment. What makes Evergrande so important? First, real estate is one of China’s primary industries, accounting for roughly 29% of the Chinese economy, with new commercial housing sales exceeding 17 trillion RMB ($2.73 trillion) in 2020. ![]() Of the many recent events, from Ant Group to the collapse of online tutoring industry, the default of China Evergrande Group is the most noteworthy given the high potential impact to the Chinese economy.Ĭhina Evergrande Centre The private sector in China faces many challenges, from lackluster global demand to government regulatory interventions.
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