On Friday, the Chinese media reported that Evergrande paid off bonds worth 83.5 million dollars, which for the time being saved himself from bankruptcy. However, this is not the end of the problems of the Chinese developer, which still has a number of unpaid bills. Even next week there will be a 30-day grace period for bonds in the amount of 47.5 million dollars.
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The Chinese real estate market is cooling down
A Chinese developer makes headlines again and again, but CNN highlights the source of the Evergrande problem. It is the Chinese real estate market that is cooling down after years of development.
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“In recent years, the company has failed to manage its business well enough, and has failed to respond to changes in the market,” said Zou Lan, director of the financial market department at the Chinese central bank.
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Evergrande on the verge of bankruptcy
Warning signs have been around for some time. Even before Evergrande was on the verge of bankruptcy, experts said tens of millions of homes in China were empty. From then on, the problem only got worse.
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Who is spreading the coronavirus? “People are afraid”
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China they have about 30 million unsold properties, which could be inhabited by 80 million people. This is almost the size of the entire population of Germany. This is according to the data of Mark Williams, chief economist for Asia Capital Economics, presented by CNN.
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Moreover, signals from the Middle Kingdom indicate that approx. 100 million properties have been bought, but have not been inhabited so far. This means that there are currently a multitude of vacant apartments in China that could accommodate up to 260 million people. “Ghost cities” is a term that is increasingly used by experts in the context of the situation.
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Real estate and related sectors make up a huge part of the Chinese economy – it is estimated that up to 30%. GDP. According to Williams, the construction sector’s share is “much higher than in other economies.” This has helped China grow rapidly over the years. At the same time, he created a ticking time bomb. If only because many developers took out loans to finance their projects.
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“Evergrande isn’t the only company in trouble,” said Christina Zhu, economist at Moody’s Analytics. In the past few days, information has emerged that more developers in China are having problems with the cash flow and have asked lenders for more time to pay off their debts.
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One of Zhu’s recent reports shows that in the first half of 2021, 12 Chinese real estate companies failed to repay bonds worth around $ 3 billion.
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The Chinese were not helped by the coronavirus pandemic, because it led to a temporary halt of work. However, after a certain pause, the market reopened. It did not take long, however, and there are currently no signs that the situation will change. In August 2021, real estate sales fell by 18%. compared to the same period in 2020.
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“China’s real estate demand is entering an era of continuous decline,” warned Williams.
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Possible bankruptcies of developers in China will create another problem. Most of the new properties, approximately 90%, are sold before completion. If companies fail, home buyers will find themselves in a difficult position. “This motivates the authorities to continue ongoing projects and restructure developers,” added Williams.
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Therefore, at the end of last month The People’s Bank of China has issued a communiqué promising to “maintain the healthy development of the real estate market and protect the rights and interests of consumers”.
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