Tuesday, September 26

Evergrande, China’s indebted real estate giant, suspends Hong Kong shares

One of the largest Chinese real estate developers, the giant Evergrande, announced on Monday that it was once again suspending trading of its shares in Hong Kong due to a massive collapse at one of its developments in mainland China.

The country’s real estate firms have struggled as a result of Beijing’s push to curb excessive debt in the real estate sector, as well as rampant consumer speculation.

Drowned in $ 300 billion (€ 265 billion) in liabilities, Evergrande has struggled to repay bondholders and investors after the Beijing crackdown suddenly turned off the liquidity taps.

“At the request of the company, the trading of the company’s shares was stopped at 9:00 am on January 3, 2022, pending the publication by the company of an announcement containing inside information”, the group said in a brief statement on the Hong Kong stock exchange.

It previously saw a suspended stock trading period in October.

Last month, international rating firms rated the troubled developer as in default after it failed to repay liabilities on time.

Previous struggles to pay suppliers and contractors due to the debt crisis led to sustained protests from buyers and investors at the group’s Shenzhen headquarters in September.

Last week, Evergrande momentarily encouraged investors by insisting that it could deliver tens of thousands of units this month and pay off some debts.

But its shares plunged at the end of the week after a report that the group had missed two more overseas payments.

In recent months, the company has repeatedly said that it will finish its unfinished projects and hand them over to buyers in a desperate attempt to save their debts, despite not having made the previous payment of more than 1.2 billion dollars ( 1,059 million euros).

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But in a new headache for the firm, local Chinese media reported over the weekend that authorities on Hainan Island ordered it to demolish 39 buildings because the structures were built illegally on an artificial archipelago in the resort.

The bloated company has tried to sell assets and cut its stakes in other companies, and President Hui Ka Yan paid off some of the debts using his considerable personal wealth.

The Guangdong provincial government, where the company is based, is currently overseeing Evergrande’s debt restructuring process.

Evergrande’s woes have had knock-on effects across China’s real estate sector, with some smaller companies also defaulting on loans and others struggling to find enough cash.

Baocheng Liu, director of the Center for Ethics in International Business at the University of International Business and Economics in Beijing, told Euronews that if Evergrande collapses, the “ripple effects will be enormous.”

“They are ubiquitous in more than 200 cities, both second-tier and third-tier cities. Therefore, there will be a massive movement of consumers who paid the money and didn’t really get their home,” Liu explained.

“The almost 100,000 people who work in these projects will lose their jobs. The companies that work in the peripheral sector will also suffer a lot. This is something that does not make us very happy,” he added.

Bloomberg News estimates that China’s real estate companies must contribute some $ 197 billion (€ 174 billion) to cover the maturities of bonds, coupons, trust products and deferred wages to millions of migrant workers in January.

Watch the full interview with Baocheng Liu, Director of the Center for International Business Ethics at the University of International Business and Economics in Beijing, in the video player above.


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