ILUSTRASI. An exterior view of China Evergrande Centre in Hong Kong, China March 26, 2018. Picture taken March 26, 2018. REUTERS/Bobby Yip
Reporter: Rizki Caturini | Editor: Rizki Caturini
KONTAN.CO.ID – WASHINGTON. Over the weekend, the topic of debt-ridden Chinese construction giant Evergrande was getting more and more intense.
There is growing fear that the collapse of Evergrande, and up to $350 billion in losses to banks and bondholders, could trigger a contagion event similar to what the US experienced in September 2008, which led to the collapse of investment bank Lehman Brothers.
The company’s overall liabilities rose to near a record CNY 1.97 trillion (US$ 305 billion), mainly due to ballooning bills to suppliers. Cash and cash equivalents fell to a six-year low.
Bloomberg calculating, Evergrande’s debt shrank to CNY 572 billion by June 2021. That’s down 20% from CNY 717 billion yuan at the end of last year. Compared to last March, debt has fallen by 15 percent from CNY 674 billion. However, trade payables and other debt rose 15% from the previous six months to a record CNY 951.1 billion.
As quoted Financial Review, Monday (20/9), Evergrande, who go public in 2009, is one of the most important enterprises in China. The construction giant’s model is to borrow money to buy state land, and then build houses en masse.
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The property developer’s ties to the Chinese economy are deep. Residential construction has become an engine of economic growth and individual wealth creation. But Evergrande’s massive debt pile makes it vulnerable to a weak property market.
Quotes CNN, in recent years, Evergrande’s debt has ballooned. The group has earned a bad reputation for being China’s most indebted developer, with liabilities totaling more than US$300 billion.
Over the past few weeks, the company has admitted to having cash flow problems. They say they can default on their debts if they can’t raise money quickly.
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The warning was underscored last week, when Evergrande disclosed in an exchange filing that it was struggling to find buyers for some of its assets.
