Global Courant
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A month after China Evergrande resumed trading on the Hong Kong Stock Exchange following a 17-month suspension, trading was halted on Thursday – at the company’s own request. After a day full of rumors and speculation, the company confirmed that chairman Hui Ka Yan is under investigation.
– Chairman Hui is subject to imposed legal measures in accordance with the law for suspected criminal offenses, China Evergrande wrote in a short stock exchange announcement.
Virtually zero probability
According to Forbes, Hui Ka Yan was Asia’s richest in 2017 with a fortune of over $45 billion (approximately NOK 500 billion). According to the latest estimates, fortunes have fallen by more than 95 percent.
Unlike China’s tech billionaires, who maintained high public profile, Hui was known for working hard and maintaining very close ties to the Chinese Communist Party, of which he is a member.
China Evergrande was a giant in China and the world’s most valuable real estate company. Three years ago, the company had annual revenues of 700 billion yuan (1,030 billion kroner) and had real estate projects in more than 230 Chinese cities.
The article continues below the advertisementIt was financed with loans. Debts and liabilities amounted to NOK 3,500 billion at the end of the second quarter. An attempt to reach an agreement with creditors has failed and the company has been barred from issuing new bonds as part of its planned debt restructuring.
– There is virtually no chance that Evergrande’s economy will stabilize, let alone improve, Professor Willy Lam of the Chinese University of Hong Kong told Bloomberg.
The most pressing challenge
There is a long list of real estate companies that are having big problems in China. Construction projects are at a standstill and apartments and houses are empty all over China. Country Garden barely avoided defaulting this fall. The company has debts and obligations of more than NOK 1,600 billion.
This threatens the Chinese economy, where the real estate sector has been responsible for almost a third of value creation for years. International financial institutions have downgraded China’s growth prospects for 2023.
DN’s financial editor: – Evergrande is a pyramid scheme
Evergrande is just the tip of the iceberg when it comes to Chinese companies’ debt problems.
02:10
Published: 21.09.21 — 03:27
– The real estate sector is the most pressing challenge that can exacerbate structural problems, including trust. Evergrande is a symptom of ongoing problems in the real estate sector and could slow China’s economic growth in the future, senior analyst Garry Ng of investment bank Natixis in Hong Kong told the Washington Post.
The September-October month is the most important period of the year for new home sales in China.
– The negative headlines surrounding Evergrande couldn’t have come at a worse time. Authorities in Beijing are making great efforts to accelerate the real estate market, Neo Wang, head of China analysis at Evercore ISE, told Bloomberg.
The article continues below the advertisementIndividual cities have made it easier to buy a home and the home equity requirement has been lowered.
– The central authorities will gradually relax the offer. In six months we will probably see a stabilization. Regulators have previously gone too far in tightening the real estate sector, Yao Yang, dean of the National School of Development at Beijing University, said at a news conference on Wednesday, according to CNBC.
Stabilization and recovery
There have been signs of stabilization for the Chinese economy in recent weeks.
– The Chinese economy is on its way back up. An increase in political support seems to result in a moderate recovery, but trend growth is still under pressure. Much is concentrated around the real estate sector, and reinforced by adverse demographic trends and migration, Capital Economics, led by China manager Julian Evans-Pritchard, writes in a report.
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The Communist Party will hold a “third plenary meeting” in October. This meeting is held every five years and traditionally aims to make long-term plans for the economy.
– A centrally controlled, comprehensive plan to resolve debt risk can be presented before or during the third plenum. The combination of these measures could ensure a moderate recovery from the fourth quarter onwards, Robin Xing, chief China economist at Morgan Stanley, said in a new report.
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Topped the list of Asia’s richest countries; is being investigated for criminal acts
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