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Lead:
In the past few years, the impact of the new crown epidemic has plunged various industries in the mainland into unprecedented difficulties, and measures such as declining performance, layoffs, and cost reductions have become inevitable choices for enterprises to survive. Among them, the real estate industry has become even worse for various reasons, and Evergrande, as one of them, has once again become the focus due to debt problems.
What caused the fall of the giant Evergrande? In this article, we will explore the ins and outs of Evergrande's debt problem and the possible future direction.
Since 2020, various industries in the mainland have experienced severe tests under the shadow of the new crown epidemic. The sharp decline in performance has forced many companies to take emergency measures such as cost reductions, layoffs and salary adjustments. However, the real estate industry has suffered a greater impact due to many factors, and the already sluggish property market has been aggravated.
As a shining pearl in the real estate industry, Evergrande has also encountered huge twists and turns in this crisis.
Recent exposures show that Evergrande has added information on 33 new enforcement personnel, involving an enforcement amount of up to 1.444 billion yuan, raising the amount of debt enforced by Evergrande to more than 22.6 billion yuan. However, despite the debt peak, Evergrande's founder, Xu Jiayin, remains optimistic that Evergrande will eventually repay all of its loans.
Evergrande Group was established in 1997, with diversified businesses covering real estate, sports, finance and tourism. Its scale is huge, covering more than 100 cities across the country, and it is one of the world's top 500 enterprises. However, during the financial turmoil, Evergrande emerged in the property market with its unique development concept, rising rapidly with an average daily sales of 100 million yuan and entering the ranks of the top ten real estate in Guangzhou.
Subsequently, Evergrande gradually expanded its business, and after 2000, it successively developed many real estate projects in Guangzhou and other areas, and the scale expanded rapidly. In 2009, Evergrande was listed in Hong Kong and became the largest overseas company, with a total market value of HK$70.5 billion at that time, showing strong market appeal. In 2010, Evergrande issued a record US$1.35 billion bond, with annual sales exceeding RMB50 billion, ranking first among real estate enterprises in mainland China.
However, with the passage of time, Evergrande is also facing an increasingly complex market environment. Although the mainland introduced a ban on property speculation in 2016, Evergrande is still expanding in first- and second-tier cities and supporting its large-scale projects with bank loans.
However, this expansion has also led to the gradual accumulation of financial pressure from Evergrande.
When the capital crisis broke out, Evergrande reached a deal with Shenfang to sell some of its assets, but it did not stop the spread of liabilities. Evergrande continues to invest in different sectors, however, its debt crisis has become increasingly serious over time. In June 2021, Evergrande defaulted for the first time and was unable to repay US$260 million in debt, which aroused great concern in the market.
In the face of the debt crisis, Xu Jiayin, the founder of Evergrande, showed a positive attitude and actively raised funds. He sold assets and encouraged internal employees to buy company buildings, hoping to ease financial pressures.
At the same time, Xu Jiayin also personally traveled around the world, selling personal assets and trying to raise funds for the company. Although he said that Evergrande will repay some of its debt in 2023, the industry generally believes that solving the problem in the face of huge debts will not be easy.
Overall, Evergrande Group faces a serious debt problem, and despite the positive attitude of founder Xu Jiayin, the real solution is still uncertain. The future development trend, whether it can be extricated and reborn, still needs to be tested by time.
Epilogue:
As the mainland government adjusts the real estate market, it may usher in a new spring.
Evergrande Group is also actively restructuring, and once successful, capital flow may recover. However, Evergrande's future is still full of uncertainty, and whether it can successfully overcome the current difficulties will depend on its own efforts and opportunities. Regarding Evergrande's debt problem, people from all walks of life are constantly concerned, what is your view on this? Welcome to leave your comments and discussion in the comment area.
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