Sudden changes in the real estate market often have direct and disastrous consequences for ordinary citizens. Many people will seek out houses to invest by making small savings. In other words, they can be more relaxed in dealing with fluctuations in money. A house is also considered part of a legacy that can go to future generations. It can help them improve their lives and have at least one place where they live. It is terrifying to think about the possibility of losing what you have worked so hard for. When the second-largest real estate company in a country that promotes the development of the global market is at risk, things get trickierThis is the case with Evergrande, and it may go bankrupt in the next few weeks.
This problem is not small.Therefore, China’s real estate market is somewhere between 20% and 30% of the total economyFrom some Regulatory changes in home purchasesSince the end of the 1990s, the industry has grown by leaps and bounds in this Asian country. Evergrande, which has over 1,300 projects in more than 300 Chinese cities, is second to Country Garden in terms of scale. The group also has a strong presence in the financial markets and is able to manage theme parks. It even has its own football team, Guangzhou, currently managed Fabio Cannavaro. The question is: Evergrande currently owes more than US$305 billion in debt.In less than a week, it owed two huge interest payments to bondholders, suppliers and retail investors. Recently reported Just yesterdayOn Wednesday, September 29, there was a “small” debt of $47.5 million.
The wolf is coming
From Middle of last year People have been worried that Evergrande might collapse in the real estate market. A company this large is mainly built on state loans and financial sector. They need to have a lot of wool in order to continue investing in projects that are eventually sold. They can pay interest as long as they purchase their development projects from them. This is especially true if the loan is free. In that scheme, Evergrande currently holds loans from more than 170 Chinese banks and more than 100 banks worldwide.
When the Chinese government decides to implement certain Padlock to this type of company (They are in debt like crazy) to get a loan. To a large extent, basically, they started asking for proof of liquidity.So Evergrande is only about 10% of total debt. Unable to have the money to complete their development projects, they began to sell piece-rate systems. One, offer Discounts up to 30% Open to the public in houses and apartments. They then tried to use some of their unfinished property as a way to pay the supplier in debt. They continue to accrue overdue invoices, putting the company at risk of bankruptcy. This problem is not over.
Too big to fail?
The size of Evergrande means that for many years it has been considered a company”Too large to fall (or break)“. Similar to what happened to some banks in the 2008 and 2009 crises, although analysts believe exaggerated I think this may be China’s “Lehman moment”. Evergrande and its owner Xu Jiayan are historically aligned with the government as well as the Communist Party.. Gossip is spreading, for example, when Xi Jinping Mention Since winning the World Cup is the country’s dream, Guangzhou began to spend large sums of money on players to pay tribute to the president. despite this, So far, it seems that the Chinese government will not directly bail out Evergrande.
With the announcement that Evergrande has paid off its outstanding debts for the second consecutive time, it is likely that there will be new actions on the market and new public policies to help ease the impact of Evergrande’s possible collapse. The actions seen so far are relatively moderate. On the one hand, the Xi Jinping government asked the People’s Bank to Stablize The price of land and houses in its territory makes real estate no longer considered a short-term economic stimulus. On the other hand, it goes beyond Ask directly State-owned enterprises began to acquire Evergrande assets; for example, including real estate development projects in and around the Guangzhou Stadium.For its part, the company completed the sale of its shares (19.3%) in the state-owned bank Shengjing Bank to obtain US$1.5 billion capitalizationAnd gave him something immediately A breather in the value of your stock.
What are the next steps for the world’s markets?
The market volatility announced by Evergrande last week is dangerous, but from an international perspective, the market volatility is not significant.Worried about a possibility Contagious effectAmong them, the bank’s financing of this Chinese company has triggered a credit crisis and an atmosphere of mistrust on a global scale. Although it appears that everyone will continue to look at China over the coming weeks, there won’t be any major disruptions. But the problems caused by this crash don’t stop thereSome markets, especially in terms of suppliers and materials, will experience significant fluctuations in the coming months.It has started in The price of copper and iron You may have a domino effect with others commodity.
All of this happened in the year of the roller coaster of raw materials He even hit the tortilla.
Evergrande could signal a warning to industries that have grown inordinately because of loans. The end result will be obvious in a few days, especially if it is just the tip iceberg of China’s economic system.The only thing we know is that this can be done among more than or less 15,000,000 families. They all want inheritance. We are scared by the consequences.