On Dec. 3, China Evergrande Group served notice on the Hong Kong Stock Exchange that it could not fulfill its guarantee obligation of up to $260 million, which may cause creditors to demand accelerated debt maturity.
Evergrande currently has a total debt of about $300 billion, including $19 billion in outstanding U.S. dollar debt. In addition, according to the Securities Times, Evergrande owes $260 million in private equity, mainly from overseas sponsors, causing the first default of overseas debt.
The China Banking and Insurance Regulatory Commission said that Evergrande’s failure to fulfill its guaranteed obligations for overseas bonds was not due to overall market risk but mismanagement and over-diversification, leading to risk explosion.
In addition, Evergrande is also a victim of pressure from the CCP’s development policy promotion, said Ren Zhongdao, a researcher at the independent consultancy Tianjun Finance and Economics.
The CCP once stated that real estate is the mainstay of the country’s economy. And the source of budget revenue from the real estate business is the largest. Therefore, real estate operators and the government are closely related.
Taiwanese financial expert Huang Shicong told The Epoch Times that if the CCP can control the Evergrande incident as an isolated case of risk from the group’s mismanagement, rather than the overall risk effect of the market, it can install confidence in many people regarding the housing market.
Huang Shicong also said this solution could help prevent the situation from worsening. However, that might be an argument to cover up confusion and worry. Like Evergrande, other giant developers like Fantasia and Kaisa have similar problems.