Evergrande, a real estate giant in China, has been the world’s most debt-saddled property developer and has been on life support for months. Evergrande has more than $300 billion in debt, hundreds of unfinished residential buildings, and suppliers who have shut down construction sites. The ratings agencies say that Evergrande is out of cash and time and default “appears probable.” Observers say if Chinese regulators do not clean up “debt bombs” like Evergrande, the country’s economy could collapse!
The founder, Xu Jiayin, is a member of the Chinese People’s Political Consultative Conference, a part of the Chinese Communist Party. It is alleged that Xu used his influence to impress creditors to keep lending money to Evergrande.
Evergrande has nearly 800 unfinished projects across China and as many as 1.2 million people who are still waiting to move into their apartments. China’s real estate crisis is leaving millions of homeowners, suppliers and domestic investors in the lurch.
Once a symbol of China’s urbanisation propped by CCP, it’s ‘debt-dependent growth model’ has sunk hundreds of companies after a brief rise. Companies like Evergrande have entered a downward spiral in which Chinese banks can no longer afford to give more funds to finish their projects. Forcing banks to continue to fund debt-ridden companies, can sink the banks themselves and in turn China’s economy.
In 2020, Chinese companies’ debt represented 160% of its GDP, compared to just 85% in the US. Foreign investors in companies like Evergrande will also be affected and could affect the economy of their native countries.
Aayush Pal 
Balaji Subramanian 
Palak Dogra