By John Meyer, business consultant – Eurasia Business News, September 21, 2021
China Evergrande Group on Monday missed loan payments to at least two bank creditors, Bloomberg reported, citing sources.
Banks anticipated this development after warnings from the Chinese authorities that the real estate developer would not be able to pay off on time, with liabilities amounting to $ 300 billion. Moreover, Monday and Tuesday are public holidays in the Popular Republic of China.
At the same time, it is not yet clear when the banks intend to declare default on Evergrande’s obligations.
The debt problems of the Evergrande caused a sharp decline in global financial markets on Monday. The Chinese real estate group is slated for interest payments on two bond issues on Thursday September 23. This day will be a key test for understanding the company’s financial position. Last week, Evergrande reported serious liquidity problems and hiring consultants to restructure its debt.
Evergrande is delaying the payment of bank loans, as well as payments to suppliers and investors. Over the weekend it became known that he had begun to pay off debts to holders of real estate investment products.
Three years ago, Evergrande was the most valuable real estate company in the world in terms of share market value and had a very intricate structure with many subsidiaries and holdings. Evergrande Real Estate owns more than 1,300 projects in more than 280 cities across China.
The big question is : What will be the reaction of the Chinese Government and the Chinese Central Bank now? Evergrande has supported the country’s “Chinese vision” that every Chinese citizen will have the opportunity to live in a good and modern apartment in the city. Any collapse of the real estate giant would hamper the policy of the Chinese state and would strongly hit the Chinese economy, which is the second largest in the world. Many banks and lenders would suffer a default of Evergrande. So far, the stock exchanges have declined and the financial markets are worried. This is a clear sign of the nervousness of investors who believe that Evergande’s risk of bankruptcy could occur.
This is a test for China, the Chinese real estate sector and the Chinese credit sector. However, since the case obviously involves millions of Chinese people who simply wanted to fulfill their dream of their own h me, one can imagine that the Chinese Communist Party will work to find a solution to this problem.
Business circles are also scrutinizing the attitude of the US Central Bank, the Federal Reserve, where an important meeting is being held today and tomorrow. In recent months, the Fed has opened the floodgates and flooded the US economy with printed money, to stimulate growth. But in case of a crisis in China, the Fed could be less generous.
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