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The tip of the iceberg? Experts discuss the causes and effects of the Evergrande Group’s collapse, which accounts for 2% of China’s GDP.


20 September 2021 22:18 GMT

Evergrande, a real estate company, has more than 250,000 banks and non-banks accounting for more than $ 300,000 million in total.

Although most of the world’s major transactions and even the cryptocurrency market have a Monday in red, experts argue that this contribution is related to the collapse of Evergrande, the 2nd largest Chinese real estate company. Due to the severe cash flow crisis many years ago.

So, Bloomberg already Qualified Such event “Evergrande Infection”According to Goldman Sachs estimates, the group’s assets are worth 2 trillion yuan or 2% of GDP From China.

On the scale of the process, Luis Tse, managing director of Hong Kong brokerage firm Securities, believes “Evergrande is the tip of the iceberg”. By insisting on Interview According to the Financial Times, Chinese architects are under intense pressure from the government to reduce housing costs, the businessman said. “There is a chain effect.”

“[Esta polĂ­tica] It also affects banks: What happens to their mortgages if property prices fall?

However, Ming Tan, head of credit rating agency Standard & Poor’s, believes the Chinese financial system is sufficient to survive the Evergrande crash without major losses. In particular, it refers to “the Evergrande exposure of banks.” Is fairly distributed throughout the departmentIn other words, no bank is greatly affected by a company’s failure. He considers it a strong risk.

Cause or symptom?

For his part, Chinese financial technician Sarah Hsu Complaint And diplomacy “Configuration failures In the financial system of China. “Banks and state-owned enterprises are the main problem for many large corporations in Asia,” he said, noting that high debt is common. The real estate sector in particular has experienced price increases over the past 20 years “, despite the government’s efforts to curb real estate speculation.

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“Even after the Evergrande problem was solved, The disease of excessive debt is likely to continue Hsu writes describing the state of the real estate company until it is too late to avoid any consequences as China is allowed to operate without restrictions in certain parts of the credit economy. “A symptom, not a cause” The problem.

In a very positive note, Peter Carney, Chief Equity Strategy Officer, Saxo Bank, commented during a conversation with Bloomberg in Beijing. “I will do anything to reduce the impact”. “Building the right communications for China and developing the right plan for how real estate should look in the new political direction. Once this is done, they will move quickly and on a large scale,” the expert said.

Evergrande, listed on the Hong Kong Stock Exchange, is the most indebted Chinese real estate company: it has liabilities $ 300 billionAfter years of borrowing to finance rapid growth, it has affected more than 250 banks and non-banks. In the early days of this month, some of his creditors demanded an immediate refund. On Monday They were summoned Several investors in front of the company’s headquarters in Shenzhen, demanding the repayment of their debts to Evergrande.

On September 9, the company offered to repay the loan in installments for five years, but the plan was widely rejected by investors. Last Sunday, he began paying his investors in wealth management products through real estate. As a result, its shares fell to $ 0.26 on Monday.