Evergrande: The story of debt and the crisis in the Chinese real estate market

The recent events surrounding Chinese real estate giant Evergrande are a reminder of the difficult situation that many major players in the Chinese real estate market find themselves in today. The West once faced a similar crisis in 2008, which was met with a gloating reception in China at the time. Ironically, however, today China is facing its own challenges in the form of the Evergrande crisis.

Hong Kong Verdict: The Beginning of the End?

The recent decision by a Hong Kong court to liquidate Evergrande, a company with debts of over $300 billion, has raised questions about the implications for the entire Chinese financial market. The decision, which was taken with some surprise, shows that even in China there may be a limit to the support for debt-laden companies.

Stocks Plunged: Signs of Crisis

News of the company's liquidation and the court decision caused Evergrande's shares to plummet by another 20% and trading was even halted. This development symbolises the deep concerns of investors and hints at a possible longer-term impact on the Chinese property market.

Home prices are falling: A Permanent Trend?

Evergrande is now considered the most indebted developer in the world and home prices in China's 70 largest cities have continued to fall for 19 months in a row. This trend points to deeper problems in China's real estate sector that go beyond one company.

Politburo and Easy Money: the End Game?

The government's Politburo, which used to provide easy access to financing for developers like Evergrande, has now restricted the flow of capital. In doing so, it may have "pricked the bubble" in an attempt to contain a potentially larger crisis. The move could be interpreted as a sign that China has learned the lessons of the 2008 global financial crisis.

Liquidation: End Game for Evergrande

Negotiations with creditors to restructure debt have failed and Evergrande is now forced into liquidation. For many, this situation is a symbolic "Game Over" for one of the largest companies in the Chinese real estate market. The question is what impact this situation will have on the wider economy.

Conclusion

The Evergrande case is an example of how rapid changes in financing policy and attitude to risk can have a dramatic impact on large players in the market. While the Chinese government is trying to stabilise the situation, the impact on the global economy remains uncertain. Evergrande, sometimes seen as China's Lehman Brothers, may thus represent an important lesson