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Asia Minute

Asia Minute: Behind China’s Collapsing Property Developer

China Developer's Debt Struggle Explainer
Ng Han Guan/AP
/
AP
Workers install a traffic surveillance camera near the Evergrande Yujing Bay residential complex in Beijing, China, Tuesday, Sept. 21, 2021. Global investors are watching nervously as one of China's biggest real estate developers struggles to avoid defaulting on tens of billions of dollars of debt, fueling fears of possible wider shock waves for the financial system. (AP Photo/Ng Han Guan)

Stock markets around the world started the week with heavy losses. One big factor was a Chinese property developer — but what’s the story behind that company — and why is it spooking investors?

The financial distress of the Chinese property developer Evergrande has never been a state secret. It’s routinely referred to in business media as “the most indebted property developer in the world.”

Even before Monday’s debacle, its stock price had fallen 90% from its highs of just about a year ago.

The Financial Times reports the company now owes more than $300 billion to creditors and other businesses — with an interest payment due Thursday.

The company was started in 1996 by a former steel factory technician — listing on the Hong Kong Stock Exchange three years later.

Urban residential real estate was its core business — but the company also bought everything from the local soccer team in Guangzhou to interests in the oil business — and more recently, electric vehicles.

Reuters reports the company’s auto unit had a value of $87 billion in April, crashing to $12.5 billion a month ago.

It’s the speed and extent of Evergrande’s liquidity crisis that’s gotten the worried attention of investors — along with questions about what other parts of China’s property and financial markets face potential vulnerability.

One big question that’s outside market forces: how much support — if any — will be coming from the Chinese government?

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