Xu Jiayin, the founder and former chairman of China Evergrande Group, has achieved great success during the boom period of China's real estate market, but has faced some challenges and difficulties in recent years, and Evergrande Group has led to the current adverse situation due to its excessive reliance on debt financing, changes in market regulation and control policies, diversified management and other factors.
Evergrande Group's main business is real estate, which is a highly leveraged industry that requires a large amount of debt financing to support its rapid development. However, in recent years, the Chinese government has tightened regulations on the real estate market to curb the rapid rise in housing prices and reduce financial risks, which has led to Evergrande's debt problems becoming particularly prominent.
Evergrande Group also diversified, Evergrande Ice Spring, Evergrande Grain and Oil, Evergrande Sports and other industries, but the operating conditions are not ideal. Among them, Evergrande mineral water business has not performed well in the market competition, mainly due to the fierce competition in the industry, Evergrande Ice Spring has deficiencies in brand and market promotion, and its products are also plagued by quality problems and negative public opinion.
The failure of Evergrande Group in diversification also reflects some problems in its operation and management, such as lack of prudent investment decisions and lack of professionalism in the management team.
The main reason for the failure of Xu Jiayin of Evergrande Group is not simply because of the unprofessional development of diversification, but the result of a combination of factors. Here are some of the reasons why Evergrande Group can get into trouble:
Over-leverage: In the process of rapid development, Evergrande Group relies heavily on debt financing, resulting in a high asset-liability ratio. Under the background of the government's strengthening of real estate market regulation and tightening of financial policies, the debt problem of Evergrande Group has become particularly prominent.
Dilemma of diversified operation: Evergrande Group has been involved in many industries, such as Evergrande Ice Spring, Evergrande Grain and Oil, Evergrande Sports, etc., but its operating conditions are not ideal. Some businesses have underperformed in the market competition, mainly due to deficiencies in brand and marketing, while their products are also plagued by quality problems and negative public opinion.
Policy risks: The government's increased regulation and control of the real estate market, including purchase restrictions, loan restrictions, price restrictions and other measures, as well as strict land and financing policies, have put great pressure on the operation and profitability of Evergrande Group.
Management issues: In the process of rapid development of Evergrande Group, the management team may have some problems, such as insufficient prudent investment decision-making and insufficient professionalism of the management team, which may have a negative impact on its business performance.
Credit crisis: In recent years, Evergrande Group has faced a serious credit crisis, including debt defaults and difficulties in the payment of wealth management products, which has led to a decline in market confidence in it and further aggravated its financial difficulties.
To sum up, the reasons for the failure of Evergrande Group's Xu Jiayin business are many, including excessive leverage, diversification dilemma, policy risks, management problems and credit crisis.
In general, Evergrande Group is affected by the comprehensive impact of many factors such as excessive reliance on debt financing, changes in market regulation and control policies, and diversified operation and management. The combined effect of these reasons has led to the current predicament and bad status quo of Evergrande Group.
Photo: Cultural and commercial culture Gu Zhiqing