A tightening of regulations and sometimes risky investments have made the Chinese real estate heavyweight falter.
Evergrande and Kaisa, another Chinese real estate developer, have defaulted on payments, rating agency Fitch said Thursday, as their health worries financial markets.
Chinese real estate giant Evergrande is strangled by an abysmal debt of around 260 billion euros.
He has struggled for several months to honor his interest payments and his apartment deliveries.
On November 6, the group should have paid a repayment on interest in the amount of 82.5 million dollars (73.1 million euros).
But he had an additional month's grace period that ended on Tuesday.
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Since last year's decree, reducing the need for borrowing and therefore debt, Evergrande has found itself short of cash to keep its activities afloat.
All-out and sometimes risky investments (tourism, leisure, digital, electric car…), when its finances allow it, also explain its precarious situation.
This is the first payment default for Evergrande which, despite several missed deadlines in September, had hitherto always managed to reimburse its creditors at the last minute.
Created 25 years ago, this sprawling empire is now doomed to disappear.
More than 200,000 jobs at risk
The authorities have dispatched to the head of Evergrande a working group "to supervise risk management".
Some analysts believe the measure marks the start of a difficult restructuring of the company, which will likely take years.
If it is confirmed, this signal sent by Beijing is of major importance: no Chinese company, even Evergrande and its 300 billion dollars of liabilities, is in theory "too big to fail", observes the newspaper Les Echos. .
In the event of bankruptcy, the economic consequences would be catastrophic for China: Evergrande says it employs 200,000 people and indirectly weighs on 3.8 million jobs in China.
Any bankruptcy would have catastrophic consequences for the Chinese economy but also on the social level with a risk of unrest.
This is why "the Chinese state is seriously involved in the management of the situation," analyst Shehzad Qazi, of the research firm China Beige Book, told AFP.
Without putting a penny in it: for the time being, Beijing is not ready to put its hand in its pocket in order to save the group.
Confidence crisis
Chinese promoter Kaisa, 27th in terms of turnover but one of the most indebted in China, has also “defaulted” on a repayment, according to Fitch.
Kaisa should have paid a repayment of $ 400 million (353 million euros) owed on loan interest on Tuesday.
The group had warned last week that it risked finding itself in default of payment.
Real estate and construction account for more than a quarter of China's GDP and serve as a powerhouse for many other sectors, such as steel and furniture.
Evergrande's setbacks are causing a crisis of confidence among potential buyers: in recent months, sales and prices of real estate have declined in many Chinese cities.
Most analysts, however, consider it unlikely for Evergrande a scenario à la "Lehman" (the investment bank whose fall precipitated the global economic crisis of 2008) because the markets anticipated these difficulties.