Indebted Chinese real estate giant Evergrande was due to make a $47.5 million bond interest payment on Wednesday, Sept. 29, but failed to meet its commitment or communicate anything about it. This is the second multi-million-dollar default in less than a week, raising doubts and fears of a possible default, which would have serious consequences for the Chinese economy and global financial markets.
Some foreign bondholders of China Evergrande Group failed to receive interest payments at the close of Asian business hours on Wednesday, Reuters reported, defaulting on their second dollar-denominated debt obligation in a week.
Evergrande’s silence on its defaulted overseas payment obligations creates great uncertainty. It leaves global investors wondering whether they will have to take significant losses when the 30-day grace periods for payments due Sept. 23 and Sept. 29 end.
No Evergrande spokesperson has commented so far, and no official statement of any kind has been issued.
The real estate giant’s debt amounts to 305 billion dollars, equivalent to 2% of China’s domestic product, keeping the international financial community alerted for fear that the situation will affect world markets.
Given this situation, Evergrande continues to sell shares to avoid collapse. It is the Chinese communist regime that comes to the rescue in the purchase of shares.
This week, the company sold almost 20% of the shares of a bank to a financial conglomerate linked to the Chinese Communist Party (CCP). The government uses government-owned companies to avoid the company’s collapse, which has sold more than one million houses and cannot build them due to lack of liquidity.
The shares correspond to Shengjing Bank, one of Evergrande’s primary lenders, and the total amount of the transaction was 9.99 billion yuan (1.5 billion dollars).
Shengjing Bank made it a condition that the net proceeds of the transaction be used purely and exclusively to settle the real estate developer’s financial obligations owed to the lender.
The requirement, accepted by Evergrande, precluded using those funds to settle debts due on Wednesday.
Meanwhile, Xi Jinping’s regime is pressing government companies and state-backed property developers such as China Vanke Co Ltd to acquire some of Evergrande’s assets, people with knowledge of the matter told Reuters.
Evergrande’s debt is so large that it makes it virtually impossible for China’s communist regime to rescue the firm from collapse.
For this reason, the authorities hope that the asset purchases will prevent or at least mitigate any social unrest that might occur should Evergrande suffer a total and disorderly collapse.
Evergrande is one of China’s largest private companies and one of the international leaders in the real estate industry. Its offices employ more than 200,000 people directly, and it also generates at least 3.8 million indirect jobs.
This is why its eventual collapse would have serious repercussions for the Chinese economy and also for the rest of the world. Specialists fear that the indebtedness of the real estate sector will also affect the banking and financial sectors.