An Evergrande executive was quoted as saying "Many people. As sales of the products fell, their business model became unsustainable. ![]() Referred to as a type of supply chain finance, investors would invest money in shell companies they falsely believed existed to supplement working capital. Total WMP liabilities stood at 40 billion RMB in September 2021. Evergrande managers, for instance, pressured subordinates to purchase products advertised at over 10% annual return. The products sold were highly risky, with an anonymous executive suggesting they were "too risky for retail investors and should not have been offered to them". The company raised billions of dollars through wealth management products (WMP) and used the money to plug holes in its own funding and to repay other wealth product investors. On 21 September 2021, the Financial Times reported that "Evergrande used retail financial investments to plug funding gaps". These leveraged investments included Ocean Flower Island, a 100 billion RMB (US$15.5 billion) project to build an artificial island on the north shore of Hainan near Yangpu in the South China Sea, plans to spend over 45 billion RMB (US$7 billion) between 20 in electric vehicle development, and ownership of Guangzhou F.C., China's richest football club. However, in the years preceding the 2021 crisis, Evergrande had pursued an aggressive expansion, including ventures in electric vehicles, theme parks, energy, and many other sectors. Įvergrande's land reserves alone were large enough to house 10 million people in 2020. In September 2021, the developer had 2 trillion RMB (310 billion USD) in liabilities. Thousands of retail investors, as well as banks, suppliers, and foreign investors are owed money by the company. (See " History" section below for more details.) ![]() The ratings agency Fitch then declared the company to be in "restricted default". The company finally defaulted on an offshore bond at the beginning of December, after a one-month grace period had elapsed. The company subsequently missed several debt payments and was downgraded by international ratings agencies. The crisis spread beyond Evergrande in 2021, however, and also affected such major property developers as Kaisa Group, Fantasia Holdings, Sunac, Sinic Holdings, and Modern Land.įollowing widespread online sharing of a letter in August 2021, in which Evergrande reportedly warned the Guangdong government that it was at risk of experiencing a cash crunch, shares in the company plunged, impacting global markets and leading to a significant slow-down of foreign investment in China during the period August to October 2021.Īfter rumours of financial difficulties surfaced in the summer of 2021, the company unsuccessfully attempted to sell assets to generate money. The 2020–2022 Chinese property sector crisis is a current financial crisis sparked by the difficulties of Evergrande Group and other Chinese property developers in the wake of new Chinese regulations on these companies' debt limits. ![]() Residential buildings developed by Evergrande in Yuanyang County, Henan.
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