Evergrande Financial Crisis Unraveled: Evergrande is a big Chinese building company, some people are looking into its business. They wanted to fix their money problems, but it’s getting more complex.
Evergrande tried something called “revamping” to change how it did business. It’s like having too many problems and trying to fix some of them. Evergrande has a lot of money problems and needs to figure out how to pay the people it owes money to. But there’s a reason why they don’t do it.
Hengda Real Estate Group is a part of Evergrande that is checked on by people who ensure companies do things right. This is where everything went wrong. People who do this kind of work are called regulators. The government aims to ensure that companies are honest with those who invest money in them. However, Hengda may not have been truthful in its dealings.
Evergrande can’t do what they had planned because of this. The fact that they can’t promise to give people money in new ways is a big problem. If they can’t figure out how to get more money, they might have to stop working and sell everything they own. This is called “liquidation,” for a big company like Evergrande, it’s not a good thing.
The price of Evergrande’s company went down a lot because of this trouble. More than 21% of it went down. This also caused problems for other building businesses. It’s like when someone trips and pulls other people down with them.
Evergrande used to be one of the largest building companies in China. But by the end of 2021, they didn’t have enough money to pay back everyone they owed. The building business in China had a lot of trouble because of this. People all over the country lost money, and the whole country had to figure out what to do.
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Evergrande has been working to fix its problems since then. They are getting help from the government and have made a plan to improve things. Evergrande had many money troubles, and by June of this year, they owed $328 billion.
They wanted to talk to those who gave them money and make new claims. The latest promises should be kept, just like promissory notes. They tell them, “We will give you money in the future.” Evergrande wanted to give these new promises to the people from other countries who had given them more than $19 billion.
But they can’t do this right now because they are still looking into Hengda. Since the plan they made isn’t working, they had to cancel important meetings with the people who gave them money.
People who gave money to Evergrande and the Chinese government thought the plan would improve things. China’s building business used to be significant and essential, but there were too many issues. They wanted some of these problems to be fixed by Evergrande.
As part of their plan, they gave the people who gave them money from other countries new promises. But because Hengda is now being looked into, this plan might fail to happen.
Evergrande has a lot of problems, and they need to figure out how to make money quickly. If they can’t, it could be a big problem for them and China’s building business. Because things are hard, everyone wants to know what will happen next.
Our Reader’s Queries
Will China bail out Evergrande?
Beijing, being in charge of money flows, doesn’t appear to be in a hurry to rescue Evergrande. According to Mr. Miller, the system is structured in a way that makes it highly improbable for a severe crisis to occur.
What happened to the Evergrande crisis?
Evergrande’s business model relied heavily on credit, which ultimately led to its downfall. Despite defaulting on its debt a year later, the company continued to sell properties and develop electric vehicles. However, it reported staggering losses of $81 billion in 2021 and 2022 before finally succumbing to bankruptcy in August.
What happens if Evergrande fails?
Should Evergrande fail to present a convincing debt restructuring plan to the judge, the company may face liquidation. This would further exacerbate the already struggling property sector, which is grappling with mounting debts and a shortage of liquidity. It is imperative for Evergrande to come up with a concrete plan to avoid such a dire outcome.
Why did Evergrande go bust?
Evergrande faced a major financial crisis in 2021, with its total liabilities soaring to a staggering $300 billion. The company was unable to pay its suppliers and complete homes, while its property revenues took a nosedive. To make matters worse, Evergrande failed to pay retail investors in its financial products on time, leading to widespread protests across the country.