China’s Evergrande Group, the largest real estate company, is on the verge of collapse. Its collapse could lead to unemployment for millions of people.
Evergrande has more than 200,000 employees and nearly 2 million people work indirectly for the real estate group, it is 80 billion USD of turnover but also more than 45 billion of short-term debts.
The group has diversified into automotive, soccer: Guangzhou FC, food and mineral water, amusement parks for children. The Chinese group has also invested in tourism, internet, digital, insurance, health, but also the electric car.
Evergrande Auto had huge ambitions and wanted to compete with the American Tesla. Two years, hardly, after its pharaonic launching, it is a financial abyss and no car is still marketed.
The share price has plummeted and has lost more than 50% of its value, from 120 billion, it has fallen to less than 50 billion USD.
Rumors are going around and many suppliers are complaining about not being paid, there is panic on board. Beijing has summoned the group to do what is necessary to settle its debts and especially to cut unnecessary costs, to sell assets to reduce losses.
It should be noted that the boss of the group, Xu Jiayin, had invested a lot of money to buy a world-class team, Guangzhou FC, in order to please President Xi Jinping, who loves soccer. Unfortunately, this club, just like the group, is very indebted and has not won any major title, and has become a golden retirement home for players at the end of their careers.
All the lights are red and almost no subsidiary is making money, like the mineral water brand Hengda Bingquan which was launched in 2014 with an impressive advertising budget by enlisting the help of Jackie Chan, the brand was withdrawn from the Chinese market in 2017 with colossal losses.
Real estate is traditionally one of the engines of the Chinese economy. But Beijing, which fears an overheating, has tightened in recent months the conditions for access to credit for property developers.Under the new rules, Evergrande can no longer sell property before formally finishing construction. The Chinese government will not let Evergrande down, and it is highly likely that Beijing will agree to help the real estate group negotiate short-term loans from Chinese banks (owned by the Chinese government).
Comment here