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Evergrande commercial complex in Beijing on January 29, 2024.
Greg Baker | AFP | Gets the image
China Evergrande Group was Laid out from the Hong Kong Stock Exchange On Monday, the exit for a former high-flight developer, which was once embodied in Beijing’s economic climb, and later came to symbolize the bust of the country.
Following its list in 2009, Evergrande became one of China’s hottest shares, and the company’s market restriction reached a maximum of $ 51 billion in 2017. The company’s stock trading has been suspended since January 2024, when it received an order of liquidation, and the market price decreased just above $ 280 million, according to LSEG data.
Evergrande, after the largest sales developer in China, will now be remembered by the world’s most borrowed developers with more than $ 300 billion, and the default default has started a wider crisis, which led to the country’s economic growth.
It was one of the earliest developers, which in 2021 stopped after Beijing rolled out his three -year policy. The policy aimed at increasing aggressive borrowing, causing the liquidity crisis as a whole sector.
The decline in housing in China has stretched for the fourth year, prices, sales, investment and construction activity, which penetrates throughout the board, weighing economic growth.
New housing prices in China fell at the fastest rate in eight months in June, decreased by 3.2% a year before healed to 2.8% decrease in July, while reducing Investments related to real estate are deepened.
Destroying bubble properties
Evergrand spinning after her collapse unfolded during a prolonged downturn of the property, which pulled on a wider economy, although analysts expect dragging in the coming years.
“The property of the Chinese bubble has reached the maximum in 2021 and has since descended,” said Andy Si, an independent economist based in Shanghai. He noted that sales of new residential facilities have halved in four years. Prices have halved in smaller cities and suburbs of major cities and fallen by as much as 30% in the central levels of cities, the economist said.
“The adjustment is not over. But the economy has already absorbed most of the impact,” SI added.
“Correction of the housing market in China remains a constant wind, although we predicts less dragging over the next few years,” said Changchun Hua, the chief economist of China in KKR, staining 1.5 percent on China’s gross domestic product in 2025, from a 2.5 percent point in 2022.
Hua estimates that the dragging will continue to only 0.3 percent points.
In A Meeting a high -level policy Last week, Chinese Prime Minister Lee Ten emphasized the need for more efficient measures to resolve the real estate market and stabilize market expectations. Property and construction sector of China made more than a quarter of China GDP Prior to the beginning of the repression in Beijing on excessive debt of developers in 2020.
On Monday, the Shanghai government announced a measure of measures to increase housing demand, including to allow families entitled to buy unlimited houses in external suburbs and calling for a reducing mortgage rate. Followed similar measures to weaken Beijing Municipal Government Earlier this month, which removed the restrictions on the purchase of houses on the outskirts.
According to William Wu, the Daiwa Markets Daiwa Markets Daiwa Capital Markets analyst will be ahead, Chinese developers rallies rallied on Monday.
“Safe Flight”
Because most private developers are already default and are undergoing debt restructuring, “we passed a past wave of peak,” said Leonard Low, Senior Credit Analyst Lucrar Analytics.
Given this, some Evergrande peers may face similar risk of delesia, said Christina Lee, Head of Studies on the Asia-Pacific Region in World Real Estate Consultation Knights Franco. Since the beginning of this year, twenty such developers have been approved for the plans for the debt restructuring plans, clearing more than 1.2 trillion yuan ($ 167 billion).
Beijing called Local authorities to ensure faster lending to the available existing developers and there are justify Given the plan for mobilizing state -owned companies to take up non -issued houses from problem developers as part of the sector stabilization efforts.
Despite the fact that the risk is more default by developers subsided, the consolidation around the state developers looks inevitable, since the long -term crisis has left home buyers more cautious than before.
“There is now a clear security flight, and buyers prefer state-owned developers and completing real estate over the Presales,” said Katie Lou, a Credit analyst Octus, which was previously known as a reorg, a financial data company specializing in debt restructuring.
Many of those major developers who will soon be “Zombie Companies” will eventually be rolled into state -owned equipment, said Brian McCarty, managing Macrolens director. He predicts that state structures will come and finance the completion of unfinished units.
“State developers will ultimately govern the entire industry. Politicians in China are never going to allow this bubble to approach something like (that) we have seen in the last 15 years,” he said.
The husk of the empire of property
Last January, the Hong Kong court ordered the Evergrande local assets to eliminate its londers after applying Alvarez & Marsal – a firm that helped relax Leman’s brothers – start the process.
So far the progress was slow. Foreign lenders have only rejected part of what they were borrowed and most Evergrande assets were sitting on the mainland.
Evergrande still has at least hundreds of unfinished projects across the country, and hundreds of thousands of buyers are waiting for their homes, and a long line of creditors: from the enterprises in China, which provided materials to the owners of bonds that seek to exclude losses.
“For Evergrande shipping remains a priority,” Lou Okus said. Evergrande said he had delivered 1.2 million houses over the past four years More than 95% sold units completedAccording to state media, citing a company representative.
However, lenders continue to face uncertain repayment prospects. While his offshore person has been in the process of liquidation since last year, massive on the shore of Evergrande are also insolvent, which offers low value of restructuring, Lou added.
Hong Kong liquidators said in supply Earlier this month’s load on EVERGRANDE’s debt was much greater than calculated and Any “holistic” restructuring would be unavailable. Evergrande’s Borrowed pile is $ 45 billionsignificantly higher than $ 27.5 billion of commitments revealed in the financial disclosure of Evergrande information in 2022, Said the liquidators.
Despite the efforts to eliminate, foreign bond holders and shareholders are likely to be largely destroyed, Macrolens said. “For foreign investors who invest in China through Hong Kong, you restricted the return to the coastal assets when everything goes bad.”
