In a recent report, Zhu wrote that 12 Chinese real estate firms defaulted on bond payments totaling about 19.2 billion yuan (nearly $3 billion) in the first half of the year. Over the last few days, a slew of other developers have disclosed their own cash flow issues, asking lenders for more time to repay them or warning of potential defaults. However, “Evergrande is not the only one struggling,” noted Christina Zhu, an economist at Moody’s Analytics. (Photo by JADE GAO / AFP) (Photo by JADE GAO/AFP via Getty Images) JADE GAO/AFP/Getty Imagesĥ things to know about the Evergrande crisis: A simple breakdownĪs China’s most indebted developer, Evergrande has become the poster child of unsustainable growth, with more than $300 billion worth of liabilities. TOPSHOT - A woman rides a scooter past the construction site of an Evergrande housing complex in Zhumadian, central Chinas Henan province on September 14, 2021. In recent years, the problem has only gotten worse. Prior to Evergrande’s meltdown, tens of millions of apartments were thought to be sitting empty across the country. The warning signs have been flashing for some time. “Instead, it blindly diversified and expanded, resulting in serious deterioration of its operating and financial indicators, which eventually led to risks.” “In recent years, the company has failed to manage its business well and to operate in accordance with market changes,” Zou Lan, director of the financial market department at the Chinese central bank, said at a press briefing. The People’s Bank of China said the company had mismanaged its business but risks to the financial system were “controllable.”
As the slow-moving crisis unfolds, analysts are pointing to a deeper underlying issue: China’s property market is cooling off after years of oversupply.Ĭhinese authorities finally weighed in on the Evergrande crisis on Friday. Evergrande’s unraveling is still commanding global attention, but its troubles are part of a much bigger problem.įor weeks, the ailing Chinese real estate conglomerate has made headlines as investors wait to see what will happen to its enormous mountain of debt.
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