9/18/2023 0 Comments Bubble struggle 2 onlineNevertheless, Evergrande was still expanding, having launched 63 new projects in the first half of 2021. The company announced in March 2021 that it was looking to cut its debt load by 150 billion RMB (US$23.3 billion). The Financial Times cited the director of S&P Global Ratings, who said that the developer was "so highly leveraged, it's likely to breach all of the alleged thresholds". But it had also become the world's most indebted property group in the process. The company's stock price had outpaced the thirty-percent growth rate of the Hang Seng Index between its 2009 IPO and 2017, having multiplied eightfold. ![]() Įvergrande Group, the second largest property developer in China, had leveraged itself heavily in the preceding years, which meant the three red lines had a major impact on their borrowing. The rule regulated the leverage taken on by developers, limiting their borrowing based on the following metrics: debt-to-cash, debt-to-equity, and debt-to-assets. In August 2020, the Chinese government enacted a " three red lines" rule, in an effort to rein in the highly indebted property development sector. Main article: Three red lines Ocean Flower Island on the north shore of Hainan near Yangpu in the South China Sea īy 2018, the central government was so concerned by the size of local government debts from land development that they announced they would not bail out creditors who were not able to be repaid. The 2007–2008 global financial crisis was addressed largely through local government investment in infrastructure, which further contributed to a reliance on increasing land value, despite accumulating larger and larger debts. Due to the financial benefits of selling land use rights, land value became central to the financial security of local governments. Average land values in China tripled to 2009, and continued to 2011, when values temporarily stopped growing.ĭue to fiscal reforms from previous decades, local governments had become increasingly reliant on infrastructure development to earn revenue, through local government financing vehicles. In 2005, the Chinese property bubble was growing. Background American Ambassador to China Terry Branstad visiting a Bo'ao hospital jointly established by Evergrande and Brigham and Women's Hospital, 2018. In September 2021, the developer had 2 trillion RMB (310 billion USD) in liabilities. Thousands of retail investors, as well as banks, suppliers, and foreign investors are owed money by the company. The ratings agency Fitch then declared the company to be in "restricted default". ![]() The company finally defaulted on an offshore bond at the beginning of December 2021, after a one-month grace period had elapsed. ![]() The company subsequently missed several debt payments and was downgraded by international ratings agencies. The crisis spread beyond Evergrande in 2021 to such major property developers as Country Garden, Kaisa Group, Fantasia Holdings, Sunac, Sinic Holdings, and Modern Land.įollowing widespread online sharing of a letter in August 2021, in which Evergrande reportedly warned the Guangdong government that it was at risk of experiencing a cash crunch, shares in the company plunged, impacting global markets and leading to a significant slow-down of foreign investment in China during the period August to October 2021.Īfter rumours of financial difficulties surfaced in the summer of 2021, the company unsuccessfully attempted to sell assets to generate money. The 2020–2023 Chinese property sector crisis is a current financial crisis sparked by the difficulties of Evergrande Group and other Chinese property developers in the wake of new Chinese regulations on these companies' debt limits. Financial crisis Residential buildings developed by Evergrande in Yuanyang County, Henan.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |