The Default of Evergrande May Spread Throughout China’s Real Estate Market
The Chinese real estate sector and economy is reeling once again as the real estate giant, Evergrande, is nearing its default deadline this Saturday. With a debt of $305 billion, the possibility of a default and its effects has been the worry of the global economy for the past weeks. Evergrande was already given a 30 day grace period for their initial deadline back in September, but also faces other debts off shore.
The default of Evergrande may be a look into the faltering real estate market in China as other property developers have or are also looking to default. This includes Sinic Holdings which defaulted on October 19, 2021 after being unable to pay for their $246 million offshore bonds. China Properties Group and Fantasia Holdings Group have also defaulted earlier in October.
Plans to sell parts of Evergrande’s assets, such as their waterfront headquarters in Hong Kong to Yuexiu for $1.7 billion, have been put on hold. Attempts to sell half of Evergrande Property Services Group to another Chinese company have also been stopped. With these failures, The government will most likely be looking to absorb parts of Evergrande into state-owned companies.
The Chinese Central Bank’s Governor, Yi Gang, has said that the Chinese economy is doing well. However, if Evergrande defaults this Saturday as the second largest property developer in China, the effects on other property developers could be devastating.
Angus Coote of Jamieson Coote Bonds in Melbourne, Australia believes that the Chinese Central bank will be able to contain the default. The central bank has been putting money into the market, attempting to slow down the contagion of default.