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Evergrande building in Hong Kong
Photo: Edmond So / imago images / ZUMA Wire
Angry demonstrators are protesting in front of the headquarters of the indebted real estate giant Evergrande - and investors fear a financial crisis in the event of bankruptcy.
It is now becoming public that the Chinese housing authority has apparently already warned banks of payment defaults.
The Bloomberg news agency reported, citing insiders.
Accordingly, Evergrande will not be able to service the interest on loans due on September 20.
The company has been in talks with financial institutions since this week.
The Chinese real estate giant has a total debt of more than $ 300 billion.
But the rating agency Fitch reassures: In their opinion, payment defaults at the real estate company are completely manageable for the Chinese banking system.
However, smaller institutions are likely to see a significant increase in bad loans on their balance sheets, according to a report by Fitch.
A stress test by the Chinese central bank showed that the average equity ratio of around 4,000 banks in the People's Republic would only decrease slightly if the number of loans at risk of default from real estate companies increased.
The Fitch analysts write that the effects on house prices in the event of a possible collapse of China's second largest real estate developer are also minor.
It can be assumed that the government will intervene to protect the interests of the households.
Fitch downgraded Evergrande's rating from “CCC +” to “CC” a week ago.
This corresponds to a “very high credit risk” and means that the rating agency's experts assessed the likelihood of loan defaults being higher.
On Wednesday, the group's shares fell to their lowest level since 2014. After a price slide of more than 20 percent, trading in the China Evergrande bond, which runs until May 2023, was suspended on the Shenzen Stock Exchange.
Other bonds of the group also gave way, but are still allowed to be traded.
Group offers customers parking spaces instead of money
In the southern Chinese city of Shenzhen, protesters gathered in front of the headquarters of the indebted real estate giant on Wednesday for the third day in a row.
A company representative offered the disgruntled business partners apartments, parking spaces or storage rooms instead of money, protesters told a reporter for the AFP news agency.
“But we don't need that.
Neither of us agreed, ”said a woman named Wang.
Home buyers, suppliers and craftsmen as well as small investors fear the bankruptcy of Evergrande.
On Tuesday, the group warned that there was no guarantee that the company would be able to meet all of its financial obligations.
The group is present in more than 280 Chinese cities and is one of the largest private companies in the People's Republic.
At the end of June, the number of apartments under construction was 1.4 million, according to the consulting firm Capital Economics, and their value was the equivalent of 170 billion euros.
More and more customers fear that the pre-paid apartments will never be built.
Suppliers and subcontractors have already complained about payment defaults;
work on construction sites is suspended.
Evergrande is not only active in the real estate industry.
In 2019, the group founded the electric car manufacturer Evergrande Auto, which has not yet sold a single vehicle.
The company also invested in the tourism, internet, digital economy, insurance and amusement parks sectors.
The company also owns the Guangzhou FC soccer club in Canton.
As with many large Chinese corporations, Evergrande's holdings are nested in more than 200 subsidiaries.
The loans and mutual financial obligations are hardly transparent.
In order to explore "all possible solutions" to alleviate its liquidity crisis, Evergrande hired the two consulting firms Houlihan Lokey and Admiralty Harbor Capital to look at the capital structure this week.
Debtors should therefore be persuaded to postpone payment terms or to get involved in alternative agreements.
Evergrande admitted that it had not been able to make "significant progress" in selling its shares.
Experts cite several reasons for Evergrande's difficulties.
After many years of booming China's real estate market, observers see "signs of a turning point."
Authorities are also taking action against speculation and want to take air out of the real estate bubble.
Rents should no longer rise so rapidly.
Supervisory authorities are taking action against excessive lending by banks to real estate companies, restricting borrowing and setting upper limits - also to curb the growing risks in the financial sector as a whole.
It is part of the regulation campaign of state and party leader Xi Jinping, who wants to regain control of powerful tech companies, online trade and financial services, gaming, driving services and the entertainment and education industries.
mmq / Reuters / dpa / AFP