Asia Minute: Behind China’s Collapsing Property Developer
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?