Major Chinese company facing possible collapse

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Brictoria
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24 Sep 2021, 2:05 pm

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Property behemoth Evergrande got a last-minute reprieve this week – but insiders claim Chinese authorities are quietly preparing for the company’s epic collapse.

The Chinese firm – now the world’s most indebted real estate company – had been facing a crucial deadline on Thursday to make good on interest payments on two Evergrande notes, with experts fearing it would default, sparking concerns of a credit crunch.

However, Evergrande managed to wrangle a last-minute deal, delaying the potential collapse that insiders predicted could lead to a global financial contagion.

<...>

Why is Evergrande in trouble?

The firm’s troubles began as China’s real estate market soared, with demand for homes in cities such as Beijing and Shanghai sending prices skyrocketing.

The company took out a string of loans and expanded rapidly, snapping up assets and making the most of China’s thriving economy.

But when property prices began to drop in smaller cities, and when the Chinese government rolled out measures to curtail over-the-top property borrowing, it left Evergrande in the lurch, with mountains of debt.

The crisis facing Evergrande is so massive that there are already signs the crisis is spilling over into even unrelated industries.

Jimmy Chang, chief investment officer at Rockefeller Global Family Office, told CNBC this week that if Beijing let the company collapse, the consequences would likely be global.

“Everyone was expecting the government would have some kind of resolution, given that Evergrande is a systemically important company,” he said.

“It has $300 billion in outstanding debt. There is a contagion issue if China Evergrande is not resolved.

“If China were to have a serious economic issue because of China Evergrande, the rest of the global economy would have contagion from it.”

Source: https://www.news.com.au/finance/markets/world-markets/authorities-quietly-warn-of-looming-china-evergrande-group-demise/news-story/a51e62e9235c5189df93956c68426cf1



naturalplastic
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24 Sep 2021, 2:18 pm

Is zat what they mean by "too big to fail"?



Brictoria
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24 Sep 2021, 11:12 pm

Based on what has been reported, it seems the government there is preparing for it to fail, taking a different approach to what occurred in other countries when large businesses faced similar issues and were "bailed out" by the government.

I have seen discussions about other problems within the Chinese economy (energy shortages, for example), as well...

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Power rationing and forced cuts to factory production in China are widening amid electricity supply issues and a push to enforce environmental regulations.

The curbs have expanded to more than 10 provinces, including economic powerhouses Jiangsu, Zhejiang and Guangdong, the 21st Century Business Herald reported Friday. Several companies have reported the impacts of power curbs in filings on mainland stock exchanges.

Power rationing and forced cuts to factory production in China are widening amid electricity supply issues and a push to enforce environmental regulations.

The curbs have expanded to more than 10 provinces, including economic powerhouses Jiangsu, Zhejiang and Guangdong, the 21st Century Business Herald reported Friday. Several companies have reported the impacts of power curbs in filings on mainland stock exchanges.

Source: https://www.bloomberg.com/news/articles/2021-09-23/china-s-power-cuts-widen-amid-shortages-and-climate-push



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26 Sep 2021, 9:39 pm

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Brictoria
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27 Sep 2021, 3:30 am

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As the crisis facing the world’s most indebted real estate company rages on, many experts have remained cautiously optimistic that the nightmare was under control.

But there are now growing fears that Evergrande’s potential collapse won’t be able to be contained as easily as many initially believed.

And there’s a reasonable chance it could end up shattering China’s wider growth model along with it.

What’s the problem?

Evergrande’s troubles began as China’s real estate market soared, with demand for homes in cities such as Beijing and Shanghai sending prices skyrocketing.

The company took out a string of loans and expanded rapidly, snapping up assets and making the most of China’s thriving economy.

But when property prices began to drop in smaller cities, and when the Chinese government rolled out measures to curtail over-the-top property borrowing, via its so-called “red lines” policy, it left Evergrande in the lurch, with mountains of debt totalling a whopping $408 billion.

<...>

Despite serious alarm over the Evergrande saga, many economic gurus have clung to the belief the government wouldn’t let the company fail or – if it did – the threat facing the wider economy would be curtailed.

But according to an alarming article by Bloomberg’s Andrew Browne, Evergrande’s “controlled explosion” might not be so easily contained after all.

And Browne argues the nightmare “may eventually blow up China’s entire economic growth model”.

The analysis explains that China’s growth model has long been based on the “doubtful” idea that demand for real estate is “inexhaustible”, which means prices will always rise.

But in reality, “migrant flows are drying up” – a trend exacerbated but not caused by the Covid pandemic – which means there’s nobody to buy all those shiny new apartments.

It’s a trend that’s already well and truly evident, with Rhodium Group director Logan Wright telling the Financial Times last week China had enough empty property to house more than 90 million people.

Source: https://www.news.com.au/finance/economy/world-economy/property-giants-looming-collapse-threatens-to-destroy-chinas-growth-model/news-story/cddcf0a2f0b8286a8db0af152d0c876c



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27 Sep 2021, 3:48 am

Real estate is a lot different than a bank or brokerage firm, there are hard, appreciable assets behind every loan, even if those hard assets have temporarily collapsed in value. In general, lenders don't really want to end up the owner of those hard assets, because there can be liabilities hiding inside them. That risk will be different in China than in the US, but I suspect the incentive for lenders to work with the company remain substantial. There is a reason Trump, to use a well known example, was able to walk away with most of his empire in tact despite his colossal debt defaults in the early 1990s (a transaction I had a lot of inside information on, back in the day).

It will be interesting to see how it plays out in an entirely system like China's.


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Pepe
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27 Sep 2021, 8:00 pm

I am so sorry China's economy is suffering. :(
I suggest we start a "GoFundMe" account. <sarcasm> :mrgreen:



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27 Sep 2021, 8:04 pm

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China Blows Up 15 High-Rises Because Constructors Ran Out of Money to Finish Them
Tons of explosives were detonated to tear down the half-finished apartment buildings in China.

by Viola Zhou


A group of high-rise buildings have been sitting unfinished in a Chinese city for seven years. And it took 45 seconds to tear them down.

Stunning footage from the demolition last month showed 14 buildings in the southwestern city of Kunming collapse in controlled demolition. The blast failed to destroy a 15th high-rise, which was torn down three days later, local media reported.


https://www.vice.com/en/article/epn3bp/ ... ng-kunming



Brictoria
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28 Sep 2021, 9:08 am

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SHANGHAI (Reuters) - China’s power supply crunch, that has shut factories across the country, may pose a much bigger threat to the economy than the debt crisis at Evergrande Group, prompting investors to shun industries vulnerable to power shortages such as steelmaking and construction.

China is facing a power squeeze from a shortage of coal supplies, tougher emissions standards and strong demand from manufacturers and industry that have triggered widespread curbs on usage. Factories have stopped operations due to power shortages and government mandates to meet energy and carbon reduction goals.

Goldman Sachs and Nomura have revised down projections for Chinese economic growth this year as a result. Shares in Chinese chemical producers, carmakers and shipping companies have tumbled, while renewable energy stocks have soared.

Investors believe the potential scale of the problems could dwarf the any fallout from liquidity troubles at property developer Evergrande, with liabilities of $305 billion, that roiled property stocks and bonds this month.

“The Evergrande crisis has been unfolding for quite some time, and I think the risks will be defused in a targeted way,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management.

He said the electricity outages would break the supply-demand equilibrium, dealing a direct blow to consumption and the real economy. “The fallout is more likely to be out of control,” Yuan said.

Yuan’s current investment stance is to bet on hydropower companies such as SDIC Power Holdings and Sichuan Chuantou Energy Co, while shorting steelmakers and coal-fired power makers.

Source: https://www.reuters.com/article/china-power-investment-idUSKBN2GO1FZ



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28 Sep 2021, 10:51 am

Pepe wrote:
I am so sorry China's economy is suffering. :(
I suggest we start a "GoFundMe" account. <sarcasm> :mrgreen:

Send a get well card.


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29 Sep 2021, 6:17 am

Brictoria wrote:
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SHANGHAI (Reuters) - China’s power supply crunch, that has shut factories across the country, may pose a much bigger threat to the economy than the debt crisis at Evergrande Group, prompting investors to shun industries vulnerable to power shortages such as steelmaking and construction.

China is facing a power squeeze from a shortage of coal supplies, tougher emissions standards and strong demand from manufacturers and industry that have triggered widespread curbs on usage. Factories have stopped operations due to power shortages and government mandates to meet energy and carbon reduction goals.

Goldman Sachs and Nomura have revised down projections for Chinese economic growth this year as a result. Shares in Chinese chemical producers, carmakers and shipping companies have tumbled, while renewable energy stocks have soared.

Investors believe the potential scale of the problems could dwarf the any fallout from liquidity troubles at property developer Evergrande, with liabilities of $305 billion, that roiled property stocks and bonds this month.

“The Evergrande crisis has been unfolding for quite some time, and I think the risks will be defused in a targeted way,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management.

He said the electricity outages would break the supply-demand equilibrium, dealing a direct blow to consumption and the real economy. “The fallout is more likely to be out of control,” Yuan said.

Yuan’s current investment stance is to bet on hydropower companies such as SDIC Power Holdings and Sichuan Chuantou Energy Co, while shorting steelmakers and coal-fired power makers.

Source: https://www.reuters.com/article/china-power-investment-idUSKBN2GO1FZ


China shot itself in the foot by trying to hurt Australia by refusing Australian coal.
Their people are suffering, as a result.
I believe Australia has found other markets.
BTW, coal prices have surged 300% recently. :mrgreen:



Brictoria
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30 Sep 2021, 2:11 am

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The crisis facing property Chinese behemoth Evergrande has escalated again, with the ailing firm missing yet another critical deadline.

On Wednesday, a bond interest payment of $US47.5 million ($A66 million) came due – a figure which should have been small change for the second-largest real estate company in China, which boasts of “1300 projects in more than 280 cities”.

But that was before Evergrande assumed the title of the world’s most indebted real estate developer, racking up a staggering $A432 billion in debt.

The crisis facing property Chinese behemoth Evergrande has escalated again, with the ailing firm missing yet another critical deadline.

On Wednesday, a bond interest payment of $US47.5 million ($A66 million) came due – a figure which should have been small change for the second-largest real estate company in China, which boasts of “1300 projects in more than 280 cities”.

But that was before Evergrande assumed the title of the world’s most indebted real estate developer, racking up a staggering $A432 billion in debt.

According to Reuters, at the close of business yesterday, “at least some of China Evergrande’s offshore bondholders had not received a due coupon payment”, a development which suggests Evergrande’s collapse could be a step closer.

Message groups blocked

In a further sign of just how devastating the Evergrande fiasco has been for China, the WeChat platform has reportedly blocked at least eight messaging groups being used by desperate citizens owed money by the struggling company.

According to Reuters, each group was being used by hundreds of individuals to organise protests and discuss their claims.

Evergrande’s spiralling debts have left countless firms and banking institutions in the lurch, as well as everyday citizens who had invested with the company or bought homes from it.

The crisis has already sparked protests in China, and a deluge of backlash across social media.

Two group members told Reuters they had been approached by authorities and ordered not to join future protests.

<...>

China’s growth model shattered

The Evergrande example is seen by many as a sign China’s overall growth model is on its last legs, with Leland Miller, the chief executive officer of consulting firm China Beige Book, saying it was “the beginning of the end of China’s growth model as we know it”.

Source: https://www.news.com.au/finance/economy/world-economy/fears-of-evergrande-collapse-intensify-after-firm-misses-a66-million-payment/news-story/367c760fa2daa6db6d4ed00770197840



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30 Sep 2021, 6:38 am

^
I don't know if this is good news for Evergrande, but the Australian share market boomed today.
Clawed back about 3 days of declines.

On one hand, I want to see Evergrande collapse, but on the other, the market is going to take a hit.
On balance, I think I'd rather see it go under.
We are talking about an aggressive jingoistic government here that spends massive amounts on its military.
A developing country my arse. 8O



Pepe
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30 Sep 2021, 6:42 am

Misslizard wrote:
Pepe wrote:
I am so sorry China's economy is suffering. :(
I suggest we start a "GoFundMe" account. <sarcasm> :mrgreen:

Send a get well card.


With the number "4" printed all over it. :mrgreen:



Brictoria
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03 Oct 2021, 11:39 pm

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HONG KONG (AP) — Shares in troubled real estate developer China Evergrande Group and its property management unit Evergrande Property Services were suspended from trading Monday in Hong Kong.

The companies’ filings did not specify why the shares were stopped from trading.

Cailian, a Chinese online news service affiliated with the state-run newspaper Securities Times, said another developer, Hopson Development Holdings, was planning to acquire a majority share in Evergrande Property Services Group.

Trading in Hopson’s shares also was suspended Monday in Hong Kong, “pending the release of announcement(s) in relation to a major transaction of the company under which the company agreed to acquire the shares of a company . . . listed on the stock exchange,” it said in a filing.

Evergrande has been struggling to avoid defaulting on billions of dollars of debt. The company owes billions to banks, customers and contractors and is facing a cash crunch.

Its situation worsened after the government tightened limits on corporate debt levels.

Source: https://apnews.com/article/business-china-hong-kong-china-evergrande-group-f48995b96c9c21a38acf3d0c743e3a68



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04 Oct 2021, 7:18 am

Brictoria wrote:
Quote:
HONG KONG (AP) — Shares in troubled real estate developer China Evergrande Group and its property management unit Evergrande Property Services were suspended from trading Monday in Hong Kong.

The companies’ filings did not specify why the shares were stopped from trading.

Cailian, a Chinese online news service affiliated with the state-run newspaper Securities Times, said another developer, Hopson Development Holdings, was planning to acquire a majority share in Evergrande Property Services Group.

Trading in Hopson’s shares also was suspended Monday in Hong Kong, “pending the release of announcement(s) in relation to a major transaction of the company under which the company agreed to acquire the shares of a company . . . listed on the stock exchange,” it said in a filing.

Evergrande has been struggling to avoid defaulting on billions of dollars of debt. The company owes billions to banks, customers and contractors and is facing a cash crunch.

Its situation worsened after the government tightened limits on corporate debt levels.

Source: https://apnews.com/article/business-china-hong-kong-china-evergrande-group-f48995b96c9c21a38acf3d0c743e3a68

Tonight I heard speculation about why the ccp is so aggressive with Taiwan.
They are handling the economy and the pandemic so badly that they are looking for a war to encourage nationalism.
It wouldn't surprise me.
Xi may be losing his grip on power.

Xi wants to be the one to reunite Tawain with the "mainland".
Hitler wanted to see things develop in his lifetime, also.
A disturbing similarity. 8O