Drama in China:
Local police arrested HNA CEO and chairman.
This is a Chinese giant that went bankrupt about three years ago, after embarking on a crazy buying spree of more than $ 40 billion and accumulating debts of more than $ 90 billion.
In this context, the giant acquired banks, an airline, famous real estate buildings in New York and around the world and more. After its collapse, the company president died in an accident that has not been fully resolved.
"One has to analyze what will happen if there is a decline in the demand for real estate in Israel, after in the last 15 years the level of demand for real estate only increases in Israel every year, along with real estate prices.
In fact, it is reminiscent of what is happening now in China, "says Nir Shmol, who serves as CEO of the construction company Snir.
Nir Shmol, Photo: Tomer Feder
Shmul is one of the world's leading construction and financial industries, asking themselves how exposed they are to the effects of the fall of Chinese giant Evergrande.
It is a company that has grown at a record pace since its inception in 1996 until the Chinese government recently began to limit the leverage of the industry, which is responsible for more than a third of the Chinese economy.
The company has accumulated loans amounting to about $ 305 billion, like the amount of debt of the State of Israel - after the corona.
The largest company in China
Shmul explains that Abergrand has become the largest real estate company in China. In many projects, it owns about 200 companies outside China. It raises a huge debt from the banks and the public for the purchase of land and assets. At the rate of apartment sales, leaving the company with tremendous inventories versus declining demand, which also led to a drop in real estate prices.
"The company had to continue investing tens of billions of dollars in construction to meet its obligations to homebuyers, who made advances before construction began, and was forced to increase its debt and credit volumes.
When the Chinese government, through the central bank, demanded banks reduce exposure to the real estate industry." "And slowing down the provision of loans to the field, the company was unable to obtain additional credit, and therefore it is currently in a state of insolvency."
Instant collapse
This case demonstrates to us, once again, how large and successful a company may find itself collapsing in an instant.
In fact, since the administration there decided to change the policy, the company has gone into a spin and has so far lost no less than 80% of its value.
In the coming days and weeks, it will become clear in the world the level of exposure of financial and other entities to the company, which as mentioned holds huge amounts of debt that could collapse other entities in the domino effect, which we knew recently from the collapse of investment bank Lehman Brothers.
It is true that in recent days it has been reassuring in Israel and around the world that the cases should not be compared, but it is also impossible to rule out the possibility of harm to other bodies.
In fact, for the Chinese government, this collapse is the issuance of a toxic abscess on the way to lowering its risks.
It therefore does not intend to intervene now in the current crisis unless it gets out of hand.
