Bills

Chinese real estate giant Evergrande could cause global turmoil if it can’t pay its bills

Snacks / Tuesday, September 21, 2021

Not the boat that blocked the Suez… But this company’s causing big issues, too. Real estate giant Evergrande’s shares sank 10% yesterday, contributing to a global stock plunge. Evergrande is the 2nd largest property developer in China, with a $30B market cap — but it owes $300B to partners. With $83M in payments due on Thursday, analysts worry Evergrande could default and affect the global economy.

  • 1.4M = Buyers waiting for their pre-purchased apartments to be built.
  • 85% = Drop in Evergrande’s stock value in the last six months.
  • $8B = How much Evergrande raised this year — just $292B short of its debt obligations.

Charge it to the card… Evergrande entered the real estate biz right after China embraced private home ownership in 1998, when homes became a symbol of China’s booming middle class. But Evergrande borrowed heavily to grow, which led to a cash crunch when regulators started cracking down on debt last year. Evergrande has asked employees for loans and tried to pay bills with half-built houses. Now, all eyes are on regulators:

  • It wouldn’t be China’s first bailout… Regulators took over the once-thriving Anbang Insurance Group three years ago due to massive IOUs.
  • Too big to (fully) fail... Regulators let Evergrande renegotiate payment deadlines earlier this month, signaling their willingness to keep the company alive.

It’s not the whale, it’s the splash… If a big fish like Evergrande goes belly up, its lenders and investors — including HSBC, BlackRock, and UBS — could lose big money. Businesses that work with it could also suffer (think: paint suppliers). But the ripple effects could be worse: Since three-quarters of China’s wealth is in real estate, Evergrande’s collapse could cause stock sell-offs across China’s real estate sector — or potentially a global sell-off, like Lehman Brothers’ collapse did in 2008. But, some analysts don’t expect Evergrande’s financial struggles to trickle into other parts of the world.

Get Your News

Subscribe and thrive

Snacks provides fresh takes on the financial news you need to start your day. Chartr provides data visualizations on business, entertainment, and society. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.