Originally published July 18, 2023 9:31 am PDT
Chinese property behemoth China Evergrande Group reported a staggering loss of $81 billion spanning two years, according to the long-awaited results report unveiled on Monday.
The corporation, which holds the dubious honor of being the world’s most burdened property developer in terms of debt, succumbed to default in late 2021.
Since then, it has been grappling with project completions and debt settlements to suppliers and lenders.
In a significant turn of events this past March, Evergrande made headlines when it declared one of China’s most substantial debt restructuring initiatives.
It is currently rallying support to successfully navigate through this restructuring phase.
A breakdown of the losses for the years 2021 and 2022 shows figures of 476 billion yuan ($66.36 billion) and 105.9 billion yuan, respectively, according to The South China Morning Post.
The company attributes these astronomical losses to property write-downs, land returns, financial asset losses, and high financing costs.
Analysts, however, remain skeptical about Evergrande’s future.
Charles Macgregor, the Asia Head at Lucror Analytics, put it bluntly: “Results are meaningless if the business model is broken.”
Evergrande’s dismal performance underscores the gravity of the issues it has confronted in the midst of a residential property crisis that has been shaking the Chinese economy for two years now.
The fallout of Evergrande’s debt disaster is evident in the property sector across China, prompting a series of defaults and leaving a trail of deserted property developments nationwide.
This financial catastrophe signifies Evergrande’s first full-year losses since its stock market debut in 2009.
Trading of the firm’s Hong Kong-listed shares has been in a state of suspension since last March, awaiting the financial results of 2021 and 2022.
Evergrande confirmed on Monday that the trading halt would continue.
If this suspension persists for 18 months, the beleaguered real estate giant may face the prospect of being delisted.
Meanwhile, a report from Fortune argues that the precipitous downfall of Evergrande Group is emblematic of the wider housing crisis in China, posing a substantial threat to economic revival.
Evergrande, established in 1996, utilized billions in borrowed funds to grow its real estate portfolio, simultaneously branching out into ventures such as electric vehicles.
In the context of China’s highly-indebted property sector, Evergrande’s liabilities were particularly conspicuous.
However, the landscape shifted in 2020 when Beijing instituted regulations restricting the amount of debt developers could maintain, which catapulted Evergrande into a liquidity crisis as their financing avenues dried up.
Consequently, the company started leaving projects incomplete and deferring payments to suppliers in an effort to preserve cash.
The ripple effects of Evergrande’s financial woes soon reached other property developers, many of whom also grappled with liquidity issues, leading to delayed construction and postponed payments to vendors, the Fortune report notes.
This uncertainty exerted downward pressure on new home prices, further straining the already overleveraged developers.
Last year, the housing crisis sparked protests when hundreds of thousands of homeowners across China refused to service their mortgages, citing construction holdups.
Even finished projects are not spared, as developers find it challenging to sell new homes.
Almost one-fifth of residences in Nanchang, the capital of Jiangxi province, remain unoccupied.
In China, real estate makes up nearly 30% of the country’s GDP.
The only bigger property developer in China is Country Garden, but it too is also facing financial turmoil.
Country Garden’s profits plummeted 96% for the first half of 2022 to $88 million from $2 billion, the result of a property sector that has descended “rapidly into a severe depression.”
The world’s largest financial asset manager, BlackRock, which is an official partner of the World Economic Forum (WEF) and a promotor of controversial ESG (environmental, social, and governance) and so-called “climate change” ideology, has been increasing its investments in both Evergrande and Country Garden.
